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View from London: Central Bank Day in US, Canada, Sweden, NZ, Australia

09/07/2017 2:51 am EST


Robert Savage

Partner & CEO, CCTrack Solutions

The euro is the focus on the day with the risk of a bigger move through 1.2050 entertaining the bulls into Draghi, writes Bob Savage, CEO of Track Research in his Thursday commentary.

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Today is central bank day – with all eyes on ECB Draghi as he tries to talk dovishly about a QE tapering plan for 2018 and massage the euro lower. This is essential for holding the “risk-on” mood.

This focus beats out politics but it’s a close second, after Trump told reporters Wednesday  “military action against North Korea was not his first choice,” even as speculation of another ICBM test over the weekend rises – South Korea expects a Foundation Day launch.

Wednesday, the resignation of Fed Vice Chair Fischer delivered a more dovish outlook for December as the FOMC now is missing four members and post Harvey/Irma and after the Trump/Democrat deal to leave the budget ceiling debate until two days after the December FOMC meeting – no hike is more likely now than a hike leaving the U.S. dollar (USD/EUR) weaker still.

The central bank focus started with the Bank of Canada hike yesterday surprised everyone and drove the Canadian dollar (CAD/USD) to multi-year highs.
Overnight, the Swedish central bank did as expected – nothing.

So too, the Malaysian Bank Negara keeping rates at 3%. SEK is at 1-week lows with Swedish krona (EUR/SEK) at 9.5210 - was weaker off 0.3% right after the Riksbank left rates unchanged and repeated no rate hikes expected until 2H2018.

Today politics still have a role to play – like they did for the U.S. – with the UK watching the first Parliamentary debate on Brexit bill with Labour gunning for seven conservative rebel votes to defeat the bill.

The New Zealand election is up for grabs and the New Zealand dollar (NZD/USD) is off for the second day – as a One News/Colmar Brunton poll shows support for opposition Labour Party remains at 43%, while that for ruling National Party falls 2% to 39%.

In Spain, the Catalan parliament voted to hold a referendum to break away on October 1. The law puts the regional government at odds with the nation as the courts already ruled the vote illegal.

There was also the 3rd place finisher for markets – economic data overnight – with the Australian trade and retail sales weaker along with the Construction PMI – that along with iron ore and other metals capped the rally of the Australian dollar (AUD/USD) while China saw its forex reserves higher thanks to the stronger Chinese yuan (CNY/USD).

The European data was weaker – German IP missed the mark while Eurozone 2Q GDP revised slightly higher – still below the U.S. rate but narrowing the gap. The EUR is the focus on the day with the risk of a bigger move through 1.2050 entertaining the bulls into Draghi.

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