In a choppy day’s trading, the U.S. dollar fell moderately against GBP yesterday afternoon, as investors booked profits on recent gains and U.S. initial and continuing jobless claims came out weaker than expected. The longer-term view on the greenback remains bullish however, with all eyes on central bank decision making this December.
In contradiction of this general bullish dollar sentiment however, St. Louis Fed President James Bullard, contradicted his more generally hawkish stance by suggesting the US and other industrial nations may be headed into an era of permanently low rates, contributing to yesterday’s dollar weakness.
In an address to the European Parliament, yesterday morning, ECB President Mario Draghi was dovish, saying inflation dynamics had somewhat weakened and that a "sustained normalisation" of inflation could take longer to achieve than thought.
The market’s interpretation of Draghi expressing this dovish view in such a high-profile setting suggest that he is confident that the majority of the ECB council will support him. This supports the longer term view that the euro will weaken, again, particularly after the 3rd December ECB meeting when the ECB are expected to loosen monetary policy by extending their quantitative easing policy and potentially cut deposits rates too, which currebtly stand at 0.05 percent.
To add credence to this view, the latest data from the Commodity Futures Trading Commission shows short euro positions among speculators in futures markets were at their highest since June, when the markets were concerned about Greek elections
09:00 - EUR: Gross Domestic Product seasonally adjusted (YoY) (Q3) expected to improve to 1.7% from 1.5%
09:00 - EUR: Gross Domestic Product seasonally adjusted (QoQ) (Q3) expected to remain constant at 0.4%