The markets were on roller-coaster on Thursday, on comments of ECB President Mario Draghi. On press conference after ECB’s policy meeting when central bank left rates unchanged, President Draghi pointed on inflation which so far doesn’t show convincing upwards trend, with inflation rate expected to pick up in 2017/18.
Draghi said that the ECB remains committed to preserving the very substantial degree of monetary accommodation which is necessary to secure a sustained convergence of inflation towards levels near projected 2% level.
The strongest moves in the markets were triggered on Draghi’s comment about possible QE tapering that was signaled on ECB’s previous meeting. Draghi said that this was not discussed on today’s meeting but QE program cannot last forever and will likely end by March 2017.
The Euro was initially lower after the press conference started but surged to session high at 1.1039 on comments about the QE program. Gains were not sustained and the single currency to the levels where it traded before press conference.
Prevailing downside risk continues to drive the Euro lower, as 1.0950 support was cracked, with spike higher seen as a noise on Euro’s underlying downtrend.
At the same time, the dollar index spiked to the session low at 97.65, but subsequent swift recovery brought the price back above 98.00 handle, to surge to fresh seven-month high at 98.22.
Economic data from US on Thursday showed mixed results, as Jobless Claims jumped to 260K, above forecast at 250K, but upbeat Philadelphia Fed Manufacturing index that came at 9.7 in October, beating 5.3 forecast, offset the negative impact and maintain dollar’s bullish stance.
Sterling extended weakness below former strong support at 1.2255 that contained consolidation in past few sessions, dragged by disappointing UK Retail Sales that below forecast (Sep m/m retail sales came at 0.0% vs 0.4% forecast while core retail sales were at 4.0% in Sep vs 4.5% forecast and 6.2% in August).
US dollar continues to hold above strong support at 103.50 against Japanese yen, following yesterday’s dip to 103.15 and subsequent bounce. However, the pair is so far not showing signs of sustained recovery that keeps downside risk in play in the near term.
Spot Gold regained traction on current market turmoil and hit fresh recovery high at $1274, after probing above yesterday’s high at $1272. The yellow metal could extend recovery towards next strong barriers at $1278/80.
Crude oil remains at the back foot in the near term and extended pullback from Wednesday’s fresh high at $52.21, posted on strong acceleration on unexpected fall in US crude stocks. Underlying uptrend remains intact and sees fresh extension towards next targets at $52.75 and $53.60, on completion of near-term correction from $52.21 peak.
European stocks are lower on Thursday, FTSE100 is down 0.2% from opening, DAX slid 0.96 to session low at 10574, but managed to recover the largest part of losses, while CAC40 lost 0.66% from opening, on dip to session low at 4499.
Wall Street maintained negative sentiment from the Europe and opened lower on Thursday. Dow Jones was down 0.28% after market open; S&P500 and Nasdaq100 were down 0.16% after opening bell., Market Analysis