Search ForexCrunch

The euro is back to levels that were prevailing ahead of the ECB press conference. The tough talk from Draghi pushed EURUSD lower but the issue is how it whether it will be followed through with action and if so, what impact this action will likely have on the currency. Next week we are going to see banks repay some of the short-term loans they took out over year end, which will further reduce the ECB balance sheet. Even though the Fed has announced tapering, its balance sheet is still expanding. Furthermore, whilst the ECB may think that it still has options left, the market is rightly less convinced that they are either imminent or likely to be effective, which is why once again the single currency has shown its resilience.

20140110 Table_0

Data/Event Risks

USD:  The market looks for a 196k gain in headline payrolls with the unemployment rate holding steady at 7.0%. Stronger numbers are likely to be dollar positive, promoting the view that the Fed are likely to continue tapering at the end of this month.

GBP:  Production data for November will help the market get a better feel for the pace of expansion in the final quarter of 2013. Both production and manufacturing are seen rising 0.4% MoM. Stronger numbers should give further support to sterling, although for now sterling reluctant for a sustained push above the 1.65 level.

Latest FX News

EUR:  The ECB emphasised its forward guidance and reminded that inflation could stay low for some time to come, but question is what they can do from here and to what degree Germany and others are likely to push against further easing measures.

AUD:  Some strong new home sales numbers overnight, rising 7.5% MoM, but only limited impact on the Aussie given the volatile nature of the series. AUDUSD is above 0.89 but is struggling to sustain move.

Further reading:

EUR/USD: Trading the US Non-Farm Payrolls

GBP/CHF: Pound Strengthening Against the Franc