The Euro rose to hit a 10 month high against the dollar after a hawkish speech by ECB chief Mario Draghi at the ECB forum in Portugal yesterday. The euro's rally came after Draghi praised the eurozone's economic recovery on the back of positive data and said that deflationary forces had been replaced by reflationary ones.
The ECB president has fuelled speculation over a tapering of asset purchases as early as September and many traders now expect the ECB to reduce its monetary stimulus, a move which would support the Euro over the medium term.
Sterling painted a mixed picture yesterday after doubts surrounding Theresa May’s ability to retain her position as UK Prime Minister. Weakness in the pound was seen following the news of the DUP deal. The deal involves a ‘confidence and supply’ arrangement that gives Prime Minister May the voting numbers in parliament required to pass her Queen’s speech as well as new legislation. However, many investors are still waiting on the Queen’s speech vote which is due to take place on Thursday before they reassess the state of the political climate in the UK.
The weakness in sterling that came later in the day was further compounded by dovish comments made by Bank of England governor, Mark Carney in his speech at the Financial Stability Report press conference. The comments made by the governor have dampened expectations of rate hike which were heightened two weeks ago after 3 members of the Bank of England’s MPC voted in favour of a tighter monetary policy.
The dollarwas down yesterday despite stronger than expected US consumer confidence data. The consumer confidence index which was initially expected to drop to 116 yesterday hit 118.9.
The dollar extended losses later in the session after Fed chair Janet Yellen’s speech offered little input on US monetary policy and reiterated that it was appropriate to raise interest rates “very gradually”.
2:30pm – EUR: ECB president Draghi Speaks at ECB Forum on Central Banking in Portugal
2:30pm – GBP: BOE governor Carney speaks at ECB Forum on Central Banking in Portugal
3:30pm – USD : Crude Oil Inventories