Euro surges as Mario Draghi hints Q.E. may be tapered, U.S. equities fall in late trade, gold and silver rise sharply

Sep 8 • Morning Roll Call • 1832 Views • Comments Off on Euro surges as Mario Draghi hints Q.E. may be tapered, U.S. equities fall in late trade, gold and silver rise sharply

There was a buildup of fevered speculation on Thursday, surrounding the ECB’s interest rate and asset purchase scheme announcement, with many analysts suggesting that Mario Draghi, the president of the ECB, would deliver a more hawkish message, by way of maintaining the current interest rate at 0.00%, but begin to immediately taper the amount of Q.E./asset purchasing, from its current level of €60b a month. The ECB in fact refrained from altering the current monetary stimulus. However, during the press conference (held midafternoon European time), Mr. Draghi did tentatively suggest that the ECB would look to set out plans to alter the stimulus program in October, with the caveat that January 2018, would be more likely to be the actual, decisive month, when tapering begins.

As a consequence, the euro rose versus the majority of its main peers. EUR/USD breached R3 as it rose by over 1%, to end the day at approx. 1.2021. EUR/GBP began the morning London/European session by breaching S1, but as the ECB’s announcement approached, the currency pair rose, then spiked through R2 as Mr. Draghi held the press conference and issued his statement. In terms of relevant European, economic news releases and data, German industrial production missed targets by coming in flat for the month of July and by falling to 4% annual growth, Swiss reserves increased to F716.7b, U.K. house prices rose by 1.1% in August, and Eurozone GDP beat forecast by delivering a reading of 2.3% YoY in Q2. European equities experienced a positive day; STOXX 50 closed up 0.40%, DAX up 0.67%, CAC up 0.26% and the FTSE 100 closed up 0.58%.

North American data releases on Thursday began with Canada’s building permits for July, which missed the prediction by coming in at -3.5%, as opposed to a predicted fall of -1.5% and considerably below the 4.4% growth registered in June. The initial weekly jobless claims figure for the USA missed forecast, by rising significantly to 298k, versus the previous figure of 236k. Continuous claims did fall to 1940k. Labour costs rose by 0.2% in Q2. Energy inventories were naturally effected by tropical storm Harvey and will be further disrupted should the approaching hurricane Irma continue its current trajectory to make landfall in Miami on Saturday. The DJIA closed down 0.10%, the SPX closed down 0.02%. Gold rose to the critical handle of $1350 per ounce, up 1.1% and its highest level reached for a year, as silver finally breached the critical $18.00 per ounce level, not seen since April. Both precious metals are continuing to attract interest as safe haven stores of wealth. WTI oil ended the day close to flat at $49.34, close to the daily SMA of 49.44, and approaching (but not holding) the $50 handle, last tested in late July and early August. USD/JPY has slumped to a reading not reached since April, closing the day out at 108.42, down approx. 0.7% on the day and at the intraday low of 108.04, reaching S2. The U.S. dollar’s completion of falls versus its main peers continued with cable; GBP/USD ending the trading day at circa 1.3097, up approximately 0.4%, but receding from the intraday high of 1.3116.

Significant economic calendar events for September 8th, all times quoted are London GMT time

05:45, currency impacted CHF. Unemployment Rate (AUG). The forecast is for the rate to remain unchanged, at 3.0%.

06:00, currency impacted EUR German Trade Balance (euros) (JUL). The surplus is expected to fall moderately to 21.0b, from the 22.3b reading recorded in June.

06:00, currency impacted EUR. German Exports s.a. (MoM) (JUL). A positive reading of 1.3% is expected to be generated, a recovery from the -2.8% figure recorded in June.

08:30, currency impacted GBP. Industrial Production (YoY) (JUL). A reading of 0.3% is anticipated, no change from June’s reading.

08:30, currency impacted GBP. Manufacturing Production (YoY) (JUL). A significant improvement to 1.7%, from the 0.6% figure delivered in June, is forecast.

08:30, currency impacted GBP. Construction Output SA (YoY) (JUL). The expectation is for a figure of 0.2% to be published, versus the 0.9% registered in June.

08:30, currency impacted GBP. Total Trade Balance (Pounds) (JUL). The prediction is for an improvement to a -£3,250m deficit, from the -£4,564m reported in June.

08:30, currency impacted AUD RBA Governor Lowe Gives Speech in Sydney. After voting to hold interest rates at 1.5% on Tuesday, the RBA’s governor may offer up clues, in terms of forward guidance, as to whether (or not) a rate rise is imminent.

12:30, currency impacted CAD. Unemployment Rate (AUG). The unemployment rate is expected to remain unchanged, at 6.3%.


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