Attention Turns to ECB

Market attention turns to the ECB. Guidance will be key with no policy changes expected.

Previous Day's Market Highlights

The dollar remained broadly weaker despite a surprise to the upside in the latest ADP Employment Change reading as trade concerns remained in focus following the resignation of Trump’s Chief Economic Advisor, Gary Cohn. Sterling-dollar again regained 1.39, although struggled to move much higher above the key level, while euro-dollar largely held above 1.24. The pound fell to a new recent low against the euro before later regaining 1.12.
 
On the other side of the pond, the Bank of Canada kept interest rates on hold at 1.25%, as was widely expected, referencing a continued need for stimulus and increased uncertainty due to trade policy risks. The comments may have seemed more dovish than expected to traders as the loonie weakened, falling back above 1.80 against the pound so that the rate again traded at its highest levels since the referendum. The BoC last raised rates in February after hiking twice in 2017.

Currency Pairing 08:00 Today Vs 08:00 Yesterday Four-Week High Four-Week Low % Change
GBP/EUR 1.1204 1.1453 1.1150 2.65%
GBP/USD 1.3906 1.4150 1.3711 3.10%
EUR/USD 1.2411 1.2556 1.2154 3.20%
GBP/AUD 1.7784 1.7999 1.7574 2.36%
GBP/NZD 1.9082 1.9456 1.8934 2.68%
GBP/CAD 1.7927 1.8051 1.7371 3.77%

Today's Market Highlights

Market attention shifts today to the ECB’s latest meeting. Policy decisions will be announced at 12:45 GMT, followed by a press conference with President Draghi from 13:30 GMT. No changes to interest rates or QE are expected, which means that attention will be firmly on any changes in forward guidance or economic projections. Questions may also be seen on the euro’s recent strength.
 
The ECB has said previously that it could be appropriate to adjust its forward guidance as soon as early 2018. However, since then, inflation has slowed further and the Italian elections resulted in a hung parliament. If speculation of a more hawkish shift is disappointed, the euro could weaken. When no policy changes are expected, market volatility is usually seen during Draghi’s press conference as traders parse his comments for nuance and policy clues, but with few changes anticipated, this may be relatively limited.   
 
Investors will continue to eye US tariff headlines, which may see additional market volatility. Reports last night indicated a possible softening towards NAFTA partners, but trade war concerns remain, and the details are yet uncertain.
 
BoC Governor Poloz will be speaking at the unveiling of the new $10 bank note, which will likely have little impact on the loonie, while Governing Council Member Lane will speak on yesterday’s meeting after the European close (20:35 GMT). On the data front, slower Building Permits could see some Canadian dollar weakness in the afternoon session.

Today's Economic Calendar

Time Currency Release Consensus Previous
12:45 EUR ECB Interest Rate Decision 0% 0%
12:45 EUR ECB Deposit Rate Decision -0.4% -0.4%
13:15 CAD Housing Starts s.a. YoY (Feb) 216.6K 216.2K
13:30 USD Initial Jobless Claims (2 Mar) 220K 210K
13:30 EUR ECB Press Conference
16:00 CAD BoC Governor Poloz Speaks
20:35 CAD BoC Gov Council Member Lane Speaks
21:45 NZD Electronic Card Retail Sales YoY (Feb) 3.4%
04:00 JPY BoJ Interest Rate Decision -0.1% -0.1%

Caxton