The ECB Press Conference is the main event of the day, softer inflation figures likely to see Draghi give the EUR a reason to slide this afternoon, few expecting Draghi to take a hawkish stance. For the Dollar, trade figures could get the markets riled again, though much will depend upon yields for the Dollar.
Earlier in the Day:
There were no material stats released through the Asian session this morning to have an impact, leaving the markets to continue responding to the jump in U.S Treasury yields through the session, 10-year Treasury yields sitting a 3.03%.
The Japanese Yen found some much needed support through the morning, up 0.09% to ¥109.33 against the U.S Dollar at the time of writing, as the Yen continued to shift away from ¥100 following the soft inflation numbers released last week and the bounce back in the Dollar. This week’s BoJ press conference and outlook report are expected to see the BoJ downwardly adjust inflation forecasts that would add further pressure on the Yen.
In spite of yield differentials narrowing in favour of the U.S Dollar, the Aussie Dollar managed to pick up 0.13% through the morning to move to $0.7575, supported by an uptick in oil and commodity prices, while the Kiwi Dollar was down 0.11% to $0.7061, sub-$0.70 levels likely to be hit in the coming days, the pair unlikely to be seeing the year’s highs anytime soon.
While the U.S President may have talked up the need for a stronger U.S Dollar, the latest run and shift in sentiment towards inflation and FED monetary policy has put the U.S Dollar front and centre once more, with monetary policy divergence likely to continue to favour the U.S Dollar through to the 3rd quarter.
In the equity markets, the Nikkei bucked the trend amongst the majors, up 0.45% at the time of writing, while the Hang Sang, CSI300 and ASX200 saw red, the CSI300 down 1.52% through the morning.
The Day Ahead:
For the EUR, economic data was limited to consumer sentiment figures out of Germany, which was in line with expectations and unchanged from April, together with prelim April inflation figures due out of Italy later this morning, forecasts pointing to softer inflation, a negative for the EUR ahead of this afternoon’s monetary policy decision and the all-important Draghi press conference.
While few, if any, are expecting the ECB to make a move this month, the uncertainty lies around how Draghi will view inflation and the outlook for the Eurozone economy. The EUR has been on the slide of late and, while the U.S may be seeing inflationary pressures build, the Eurozone remains some way behind that should see the EUR continue to weaken against the Dollar, sub-$1.20 levels likely to be hit in the coming weeks should Draghi peg back further any hopes of a shift in policy.
At the time of writing, the EUR was up 0.14% to $1.2178, with near-term direction in the hands of Draghi later today.
For the Pound, economic data is limited to mortgage approval figures that are unlikely to have a material impact, as the Pound continues to struggle with sentiment towards Brexit and the survival of Theresa May at the helm weighing.
The UK economy may have surprised many in spite of inflation overshooting the BoE’s 2% target for an extended period of time but, with the BoE now expected to hold back on a move next month, following some weak economic data, and the British government struggling with the Establishment in Brussels, any major rally in the Pound will likely be on hold, near-term upside in the hands of Carney and May.
At the time of writing, the Pound was up 0.07% to $1.3942, with direction through the day in the hands of the Dollar, stats out of the U.S on the heavier side, and Brexit chatter, with the Irish border issue continuing to cause issues for the British PM.
Across the Pond, economic data out of the U.S includes the weekly jobless claims figures, together with March’s trade and durable goods orders numbers.
We will expect focus to be on core durable goods that should be a positive for the U.S Dollar, though much will depend upon whether U.S Treasury yields can hold at 3%, the U.S administration as much of an influence on direction as key economic indicators.
At the time of writing, the Dollar Spot Index was down 0.01% to $91.16, the latest Dollar bull trend seeing year-to-date losses shrink to just 1.05%, the Dollar at its strongest since early January.