07/04/2017 - Draghi To Maintain Current Monetary Policy

EUR

The Euro weakened yesterday, as the ECB’s Mario Draghi remarked in a speech that the Bank still has no plans to reassess its current monetary policy, and that record low interest rates are likely to remain in place for the foreseeable future. The claims came as a disappointment to EUR investors, who had begun to speculate that the ECB may start to tighten monetary policy later in the year after Draghi had claimed that the Eurozone was no longer at risk of deflation.

The ECB has come under increased pressure to raise interest rates in recent months, as Eurozone inflation has edged higher, eventually overtaking the central bank’s target rate of 2% in March.

However, the Central Bank was unconvinced by the data, as it suggested that the surging oil prices at the start of this year were propping up prices. This appears to have been validated by the drop in Germany’s inflation rate at the end of last month following the plummet in oil prices.

Reaffirming its stance, Draghi said that the Bank would need more signs that inflation was strengthening before it would consider altering its policy.

USD

New applications for US unemployment benefits recorded the biggest drop in nearly two years last week, in another sign that the job market appears to be increasingly secure for workers.

Initial claims for state unemployment benefits declined 25,000 to a seasonally adjusted 234,000 for last week, according to the Labour Department. Claims have now been below 300,000, the threshold associated with a healthy labour market, for 109 straight weeks. This is the longest such stretch since 1970, and also shows that labour market is currently near full employment.

The March jobs report, to be released this afternoon, is expected to show that employers added 180,000 jobs last month, after rising by 235,000 in February. The unemployment rate is expected to hold steady at 4.7 percent. If these figures are matched or beaten, the report will provide further evidence of an increasingly robust US labour market, and may add to expectations that the Federal Reserve will look to raise interest rates again soon.

President Trump is currently meeting with Chinese President Xi Jinping, in a high-stakes summit for both leaders. Trump is expected to press his counterpart for action on North Korea, and Mr Xi to seek assurances on Taiwan. Mr Trump has so far not followed through on his threat to formally label China a "currency manipulator", or to hit Chinese imports with punitive tariffs. However, he tweeted last week that the US would no longer tolerate massive trade deficits and job losses.

Key Announcements 

09:30 : GBP – BOE Gov Carney speaks

13:30 : USD -  Average Hourly Earnings m/m, expected to remain unchanged at 0.2%

13:30 : USD -  Non-Farm Employment Change, expected at 180K against a previous of 235K

13:30 : USD -  Unemployment Rate, expected to remain unchanged at 4.7%