Daily Market Update

Euro Falls Following Central Bank Caution

July 26, 2018

Euro falls following central bank caution.

USD

Currently, European Central Bank President Mario Draghi is speaking at his post-meeting press conference without much to shock the markets with. Euro may ultimately stay in familiar levels since all that has been confirmed is that quantitative easing will come to a complete end in December. Tariff concerns are still pressuring the shared currency even as EU Commission President and U.S. President Donald Trump agreed to ‘cease fire’ on the trade war, avoiding a proposed 25.0% tariff on autos for now.

Against all other counterparts, the greenback is steady. Metal prices have gone up, thus recently aiding commodity-based currencies in the past few days. Recovery has also been stagnant because the U.S. economy is presenting a healthy situation. We shall see if it is verified tomorrow as GDP is expected to register at an ambitious 4.2% in Q2 when the prior reading for Q1 was 2.0%.

 

EUR

The Euro has lost some ground after the ECB decided to keep everything unchanged. The focus on caution seems to be dragging the Euro at the moment and President Mario Draghi presents his points. As expected, the bank confirms they will end the monetary QE bond-buying program in December.

However, there are no adjustments in the language referring to interest rate guidance, which signals that interest rates may once more be delayed. Draghi also mentioned protectionism as a negative for global growth overall. No mention on debt re-investment either. It seems like this may be considered a dovish event.

 

GBP

The Pound will remain under pressure as long as Brexit negotiations remain unclear, but things could change in terms of the pace of meetings and talks moving forward after changes to the cabinet. Prime Minister Theresa May appears more determined than ever to work out her vision of a softer “Leave” scenario now with Brexit Secretary Dominic Raab following her direction.

Raab is set to meet again with EU Chief Negotiator Michel Barnier today, causing the news site Politico to point out that the two have met more in the last eight days than former official David Davis did the past six months. We think economic stagnation will hurt Sterling throughout the rest of the year.

 

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