Daily Roundup – Markets review
Yesterday was all about the ECB and they certainly didn’t disappoint. The monetary policy meeting saw a raft of options laid out for staving off recession, including news that any rate hike wouldn’t take place this year. That was sufficient to see EUR/USD post is biggest one day decline in around nine months and pushed down to levels not seen since the summer of 2017. With the stall now set, further downside pressure may be limited, although with potential questions now being asked over the strength of the US labour market too, the pair may now be looking fairly priced.
With another week passed and no progress being reported on the US-China trade deal, there’s little reason to cheer the Aussie dollar right now. We’ve also seen disappointing GDP and a dovish call from the RBA, so downside pressures are likely to be maintained here. Yesterday saw a brief foray below 0.7000 on AUD/USD and although a reversion has been seen, until a deal is signed between Washington and Beijing, downside pressures are likely to persist here.
The short term focus will be on today’s NFP and wages reading from the US. After Wednesday’s miss in the ADP print, expectations have been moderated here although any decline in the pace of wage growth has the potential to soften the dollar. The Fed needs and excuse to end the quantitative tightening program and the risk of slowing inflation would give just cause for this.
Looking into next week, Sterling will be in the spotlight as the market eyes Brexit progress. Assuming we see no big movement from the EU this weekend, the process is likely to see Theresa May lose her next vote on Tuesday, a vote to leave without a deal being lost on Wednesday and a vote to extend the whole saga being won on Thursday. As each of these events takes place, a level of uncertainty is removed from the table. However the path above is reliant on all remaining EU members agreeing to any extension. That’s a risk which cannot be underestimated and suggestions from corners of the trading bloc that resistance may be seen could keep Sterling under pressure.
EUR/CAD has this week formed a death cross with the 50 day moving average falling below that of the 200 day. A move back to 1.4990 marking the 50% reversion of the 2017 rally could now be seen.