Euro recovers after dovish ECB comments

The euro was a major talking point after ECB commentary highlighted deflationary concerns and the potential to implement counter-measures.

Banque de France Governor Christian Noyer said there’s a risk that low inflation will remain for some time and this is likely to see interest rates remain low or go even lower. EUR/USD extended its losses after some dovish comments by a couple of ECB members including Asmussen who suggested the ECB still had room to take more easing action if deflationary pressures intensified. EUR/USD dipped below 1.35, trading as low as 1.349 before managing to find buyers on dips. The bounce was partly due to a weaker-than-expected pending home sales reading out of the US which weighed on the greenback. The US pending home sales reading came in at -0.6% while the market expected a 2.2% rise.

The European calendar is extremely light today but there will be plenty of action on the US dollar side. Following on with the housing theme, we have building permits and housing starts data due out today. We also have the Case-Shiller house price index due out. The Conference Board releases its consumer confidence reading which is expected to show a strong improvement.

AUD lifted by RBA comments

The AUD has been a talking point this morning as it finally managed to come off its lows on the back of some comments by RBA Deputy Governor Phillip Lowe. AUD/USD printed a low of A$0.912 in US trade, with traders clearly on the short side of the trade heading into Lowe’s speech. While Lowe acknowledged that intervention is an option, he also added ”the threshold for intervention is fairly high” and that was the key line for investors. This gave AUD/USD room to push higher in Asia and is now within striking distance of A$0.92. Today’s comments could be the start of a near term bounce for the AUD. The main event will be Thursday’s capex numbers. I still favour selling the pair into strength, particularly into the A$0.93 region.


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