Another Draghi Roller-Coaster

It was the exception, rather than the rule, that the volatility in the euro yesterday was more down to market positioning that the changing messages through Draghi’s press conference. There were residual expectations for further easing measures, so the initial rally was more to do with covering of short positions. Thereafter, the underlying tone was indicative of a central bank wanting to see how current policies impact the economy but also pushing back against criticism from some member states (particularly Germany) regarding the ECB’s ultra-accommodative policy stance. In the wider picture, what’s noticeable is that the ECB’s policy stance is not driving the single currency through the floor, in part because US short-term rates have also been pressured lower in through most of March and early April. Non-conventional policies have become conventional.

For today, the early focus is with activity data in the Eurozone, with preliminary Eurozone PMI data released at 08:00 GMT. Thereafter, CPI data in Canada is out at 12:30 GMT, where both the core and headline rates are seeing falling from the levels recorded in the February data. Despite the rally seen for most of the year, the CAD remains in fairly firm shape, with another USDCAD low seen this week at 1.2593 this week. As with sterling, this is in part linked to the better risk environment we are currently seeing, together with the on-going recovery of the oil price through the week.

Did you know?

The GBP/USD pair is widely referred to as “cable”. The term dates back to the 19th century, during which the exchange rate between the U.S. dollar and the British Pound was transmitted across the Atlantic via a huge cable that ran across the ocean floor and connected the two countries.

Word of the day
"Abandoned Baby" - A formation on a candlestick chart indicating reversal.
Pro Tip

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