Draghi Delivers, Euro Crushed

The ECB unleashed a 1.14 trillion euro QE package to exceed market expectations. The euro was the laggard on the day as it suffered its sixth-worst loss on record but it wasn't the only currency to suffer as the US dollar ripped higher.  The China HSBC PMI is next amidst reports the PBOC could ease further if January data is soft.

Draghi pledged 60 billion euros in asset purchases until at least Sept 2016. Leaks a day earlier suggested 50 billion a month with an end date of either December or Dec 2016. The ECB also lowered the borrowing rate on TLTROs.

The euro initially fell a full cent to 1.1510 but recovered most of the losses when Draghi revealed asset purchases would be made by the national central banks. But the rebound didn't last long and it was a straight shot lower from there to as low as 1.1315.

The pain wasn't restricted to euro bulls as cable fell more than 2 cents and broke 1.5000. The Australian dollar fell below 0.8000 and USD/JPY touched above 1.2400. Early in US trading, USD/JPY was under pressure and fell to 117.75 but it quickly turned around and is nearly a cent higher.

Some of the technical levels taken out Thursday were key long-term barriers and it seems as if the US dollar rally is gathering momentum. When the euro didn't slide on the euro leaks yesterday, the idea of a sell-the-fact sort of market reaction entered the discussion but it was anything but.

Technically, the Australian dollar break of 0.80 may be particularly notable because it also represented the 2010 low and talk of rate cuts is spreading.

There are also short-term risks with HSBC set to deliver its January preliminary manufacturing PMI at 0145 GMT. The consensus is 49.5 and the prior was 49.6. The China Securities Journal reports today that the PBOC may ease liquidity further if data disappoints in January so a soft reading may turn out to be a blessing for the Aussie but not right away.