Euro weakens on Dovish ECB

The ECB conference was marked by relatively dovish comments from Mario Draghi. The central bank’s bond-purchasing programme will remain unchanged until the end of September, and then for it to be gradually reduced until year-end where the QE programme will finish. It was also announced that rates would remain unchanged until the 2nd half of 2019. This resulted in a weaker Euro against the pound and the dollar during the afternoon session. Elsewhere, both UK and US retail sales data came out above forecast which also contributed to the weaker Euro story.

Previous Day's Market Highlights

Despite a relatively busy economic calendar, Thursday was dominated by the ECB meeting. Rumours were found true, as the ECB announced that December would bring an end to its quantitative easing programme. The monthly net asset purchases will be reduced to €15bn in the final quarter of the year, before ceasing all together.
 
This seemingly hawkish shift in monetary policy was largely overshadowed as the ECB also indicated that it will keep interest rates unchanged “at least throughout the summer of 2019”. This is due to fear that inflation will constantly miss the ECB’s 2% target over the next few years.
 
Elsewhere, US retail sales (MoM) beat expectations coming in at 0.8% compared to a forecast of 0.4%. This coupled with the dovish ECB rhetoric saw EUR/USD fall by over 200 pips in the afternoon session, trading at a low of 1.1567, it’s worst weekly loss since November 2016.
 
Similarly, in the morning session, sterling saw gains of 1% against the euro, after better than expected retail sales data, and climbed to 1.3446 against the US dollar. However the bull ride was short-lived as GBP/USD saw a sharp selloff, and is now trading at two week lows of 1.3250.

Currency Pairing 08:00 Today Vs 08:00 Yesterday Four-Week High Four-Week Low % Change
GBP/EUR 1.1446 1.1478 1.1302 1.53%
GBP/USD 1.3233 1.3619 1.3204 3.05%
EUR/USD 1.1552 1.1996 1.1510 4.05%
GBP/AUD 1.7763 1.8241 1.7518 3.96%
GBP/NZD 1.9067 1.9702 1.8928 3.93%
GBP/CAD 1.7402 1.7567 1.7055 2.91%

Today's Market Highlights

The week ends with a relatively quiet day on the economic calendar. The highlight of the morning being Eurozone final inflation data year-on-year at 10am which is forecasted to come out at 1.9%.
 
In the afternoon session, we have Canadian Manufacturing Sales data released at 1.30pm which is forecasted at 0.6%

Today's Economic Calendar

Time Currency Release Consensus Previous
JPY Bank of Japan Interest Rate Decision -0.1% -0.1%
10:00am EUR Eurozone CPI (MoM) 1.1% 1.9%
10:00am EUR Eurozone CPI (YoY) 1.9% 1.9%
2:15pm USD US Industrial Production 0.2% 0.7%

Caxton