Daily Market Update

Euro Jumps on Draghi; ECB

September 07, 2017

The U.S. dollar continued to tank overnight after slipping across the board yesterday. Despite decent economic data released yesterday morning, the greenback became under pressure after Federal Reserve Vice Chairman Stanley Fischer announced he would step down next month.

USD

The U.S. dollar continued to tank overnight after slipping across the board yesterday. Despite decent economic data released yesterday morning, the greenback became under pressure after Federal Reserve Vice Chairman Stanley Fischer announced he would step down next month. The move from Fischer, a policy hawk, was unexpected. Analysts now see less of a chance that Fed President Janet Yellen will be asked to continue as Fed chief when her term expires. Previous speculation was that if Yellen were not asked by Trump to continue, White House economic adviser Gary Cohn would be an obvious pick to be the new Fed chief. However, the Wall Street Journal is reporting that Cohn, who is Jewish, is not being considered anymore after he criticized the President’s response to the white supremacist rally in Charlottesville, VA. The uncertainty around the future of the central bank and the possibility of a more dovish stance moving forward is weighing on the greenback.

This morning’s economic docket is being overlooked as European Central Bank President Mario Draghi speaks at a news conference following the ECB’s policy decision. However, the data showed continued promising signs for the U.S. labor market. Weekly jobless claims registered higher than expected, but the continuing claims remains near the best in four decades.

 

EUR

The Euro is strengthening this morning in highly choppy trading. The European Central Bank did not announce any changes to its current monetary policy, which was expected. They also did not hint at any further plan to reduce its purchase plan in the coming months. However, the Euro shot higher almost immediately after ECB President Mario Draghi took to the podium. He is continuing to speak at the time of writing so we will be watching his comments very carefully. Early in his speech, Draghi said “recent euro volatility is a source of uncertainty.” Draghi has not specifically “talked down” the Euro, allowing Euro bulls to push the currency higher.

The ECB raised its growth forecast for 2017, but has but its inflation forecasts for 2018 and 2019.

Expect extreme volatility over the next few hours as market participants digest these developments.

 

CAD

The Canadian dollar staged a momentous rally yesterday after the Bank of Canada surprised some by hiking interest rates for the second time this year. The 25 basis point hike raised rates to 1.0% and closed the relative gaps between the BoC and the U.S. Fed. The Canadian dollar is holding at its strongest level since June 2015 versus the U.S. dollar.

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