Euro rises as Mario Draghi delivers hawkish speech, dollar recovers as Trump denies aims to weaken the currency, gold falls after a run of substantial gains

Jan 26 • Morning Roll Call • 695 Views • No Comments on Euro rises as Mario Draghi delivers hawkish speech, dollar recovers as Trump denies aims to weaken the currency, gold falls after a run of substantial gains

The euro rose versus many of its peers during the afternoon session on Thursday, after Mario Draghi delivered what was generally regarded as a hawkish statement, during his press conference, held after the ECB announced that the interest rates would be kept at 0.00%. Mr. Draghi testified that growth in the Eurozone’s economy was broad and strong and as a consequence inflation would rapidly grow, to reach the ECB target of 2%. Analysts and investors took this as a clue that not only would the APP stimulus scheme be tapered more aggressively during 2018, but that the interest rate may rise later in the year.

At one stage EUR/USD rose by circa 1% to breach the 1.2500 handle, before giving up the majority of the day’s gains, to close out up circa 0.2%. Overall optimism for the euro area was boosted by promising sentiment data from Germany; including the GfK consumer confidence beating the forecast, with a reading of 11 for February. Despite the encouraging data, the DAX and other leading European indices sold off sharply.

Sterling pared its gains versus the U.S. dollar and fell versus the majority of its peers during Thursday’s sessions, falling most sharply versus the Swiss franc, which has enjoyed safe haven appeal during the most recent trading sessions. Sterling’s performance was not aided by new cracks and divisions opening in the Tory party in relation to Brexit and the CBI (a U.K. trade body) publishing disappointing trade sales data; total reported distribution sales fell from a reading of 24 to 14 for January, suggesting that retail sales figures for January will be poor. The U.K. FTSE closed down 0.36% with GBP/USD closing out close to the daily pivot point. Sterling’s fortunes may be restored as Mark Carney, governor of the BoE delivers a speech at Davos on Friday.

USA equities enjoyed another daily rally, with both main indices breaching record highs once again, the DJIA closing out at another record high, after reaching an intraday record high. Markets appeared to be sustained due to Trump’s arrival at Davos, when during meetings with various world leaders, and interviews with USA broadcasters, he appeared to be far more conciliatory with regards to the putting America first credo; “The dollar is going to get stronger and stronger and ultimately I want to see a strong dollar,” Trump stated during an interview with CNBC from the World Economic Forum, reversing the statements made by Treasury Secretary Mnuchin, who had claimed the dollar was too high on Wednesday.

Analysts will monitor Trump’s speech carefully tomorrow when it’s delivered to the forum, for any signs of the protectionism Mnuchin suggested on Wednesday upon his arrival at the event. The U.S. dollar reversed its recent trend and the daily trend after Trump’s comments, clawing back initial losses versus: yen, euro and sterling. Gold arrested its recent surge, closing down circa 0.8% at 1,348, after printing a multi month high of 1,366. WTI oil also slipped, closing out the day down circa 0.5% at $65.20 per barrel. The dollar spot index closed down circa 0.1%.

U.S.DOLLAR

USD/JPY initially fell through S1, before recovering to break back up through the daily PP, closing out close to flat on the day at 109.4. USD/CHF initially traded in a bearish daily trend and wide range, falling through S2 before reversing direction to break up through R1, closing out down circa 0.3% at 0.941. USD/CAD followed a similar pattern to the majority of USD pairs on the day; falling before recovering to end the day at circa 1.237, up approx. 0.1% on the day.

EURO

EUR/GBP rose up through R1 to close out up circa 0.3% on the day at 0.876, registering the first day’s rise since January 16th. The cross currency pair is still some distance from the 200 DMA sited at 0.884. EUR/USD briefly reached 1.2500 breaching R2, before retracing and giving back some gains, closing out the day at circa 1.238, up circa 0.2%. EUR/CHF whipsawed through a wide range with a bias towards the downside, initially falling to S1 before recovering to break up through the daily PP, to then fall back through S2, eventually closing out down 0.4% at 1.166.

STERLING

GBP/USD rose through R1 up circa 0.3% on the day, to then give up the gains to close out down circa 0.1% at 1.412, down circa 0.1%, breaking an unbroken winning streak of two weeks. GBP/JPY followed a similar pattern to cable; rising through R1 to give up the gains, falling back to 154.7, down circa 0.2% on the day. GBP/CHF registered perhaps the largest fall of the day with regards to main currency peers, falling by over 1%, crashing through S3, to close out at circa 1.330.

GOLD

XAU/USD whipsawed through a wide range during the day’s trading sessions, reaching a multi month high of 1,366, whilst breaching R2, before reversing the daily trend to slump to approx. 1348 at the end of the day, falling through S2 closing down circa 0.8%.

EQUITY INDICES SNAPSHOT FOR JANUARY 25th.

• DJIA closed up 0.54%.
• SPX closed up 0.06%.
• FTSE 100 closed down 0.36%.
• DAX closed down 0.87%
• CAC closed down 0.25%.

KEY ECONOMIC CALENDAR EVENTS FOR JANUARY 26th.

• GBP Gross Domestic Product (YoY) (4Q A).
• CAD Consumer Price Index (YoY) (DEC).
• USD Advance Goods Trade Balance (DEC).
• USD Gross Domestic Product annualised (QoQ) (4Q A).
• USD Durable Goods Orders (DEC P).
• GBP BOE Governor Mark Carney speaks on panel at Davos.

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