Currency markets were mostly quiet overnight, but have come to life in early trading following the decision by the European Central bank to taper their quantitative easing program.
Currency markets were mostly quiet overnight, but have come to life in early trading following the decision by the European Central bank to taper their quantitative easing program. So far the greenback has been the beneficiary, gaining against the Euro and other peers. It appears most of the currency movements today will be related to the fallout of the taper plan.
However, there are still domestic developments that traders will be keeping a close eye on. House GOP leaders are hoping to pass a budget vote later today in order to release a tax reform bill as early as next week. While running the risk of sounding like a broken record, tax reform is widely regarded as a dollar-positive initiative.
Weekly jobless claims registered right in line with expectations. Later the Bloomberg consumer comfort index and pending home sales will cross the wire. Third quarter GDP will be released tomorrow morning and represent the biggest domestic risk event of the week.
After weeks of speculation, the European Central Bank announced its plan to taper its massive quantitative easing program. The central bank said it will extend its program until at least September 2018 which is a nine month extension. Most importantly, the central bank will reduce its monthly purchases to 30 billion euro a month, down from its current policy of 60 billion euro. The decision is in line with most economists’ expectations. Nevertheless, the Euro is under pressure following the decision, falling half a percent against the U.S. dollar.
The British pound gave back some its gains from yesterday overnight, falling about half a percent versus the greenback. The sterling rose yesterday after strong data all but guarantees the Bank of England will raise interest rates 25 basis points next month. However, traders are refocusing on Brexit negotiations and the fact the Bank will likely pause after one interest rate hike. With sterling out of the spotlight today, expect the currency to remain under modest pressure.