08/09/2017 - Euro's Run Continues

EUR

The euro continued its bullish run yesterday despite the ECB’s decision to leave the main refinancing rate unchanged at 0%. Although the bank also left unchanged its monthly €60 billion asset purchase, president Mario Draghi yesterday highlighted the monetary authority’s plans to reduce bond purchases next month and said that the ECB will decide on the “calibration” of its policy beyond 2017 this Autumn.

He went on to add that the majority of decisions regarding the bank’s bond buying stimulus programme will be taken in October and that the bank will continue to monitor the volatility in the single currency as it is a source of uncertainty.

The ECB president also commented on the economic outlook for the monetary union adding a “broad based” recovery is underway across all nations and industries.  Draghi did not however overlook the “very substantial degree of monetary support” needed by the euro zone over the coming months.

After the bank cut its inflation forecasts for both 2018 and 2019 by 0.1%, Draghi stated that the core figure has not increased by as much as expected and also warned that headline inflation could potentially enter negative territory towards the end of this year. The bank did however upgrade its growth forecast for 2017 and 2018 to 2.2% compared to 1.9% in June.

USD

The dollar lost ground against other major currencies yesterday after weaker than expected U.S jobless claims data. The U.S. Department of Labour yesterday reported that the number of individuals who filed for unemployment insurance for the first time during the past week rose to 298,000, up from 236,000. Analysts had initially only expected the figure to increase to 245,000

The release of the data caused USD to lose the momentum it received on Wednesday after a new deal between the Trump administration and the Democrats in Congress to extend the debt ceiling.

The agreement which caught markets by surprise is expected to provide the US government with extra funding until mid-December making an unprecedented default on U.S. government debt seem less likely.

Key Announcements

09:30 – GBP – Manufacturing production m/m; Forecast at 0.3% against a previous of 0%