Draghi's Jaw Breaks Euro Run

Jawboning from Draghi and tensions in Eastern Ukraine are the main focuses of the new week. The euro is down a half-cent in early trading with the dollar slightly stronger across the board. UK house price data is an early indicator to watch. 

Draghi made a strong attempt to talk down the euro on the weekend and so far it's working. The euro rallied to 1.3886 from 1.3705 last week despite mild hints of unhappiness from the ECB. Draghi stepped up the rhetoric on the weekend, saying “The strengthening of the exchange rate would … require further monetary policy accommodation.”

Trading is thin early in the week but the euro is about a half-cent lower at 1.3842.

Other market pressure could come from Ukraine where bullets flied on the weekend and pro-Russia militias captured police and state security headquarters in Slaviansk. A small number of men were injured or killed on both sides and Ukraine's president said he will launch a military counterattack against the militias unless they lay down their arms on Monday.

If the threat proves true it will mark an escalation in the conflict and raise fresh questions about a Russian invasion. It would also be a good reason for the 'risk off' tone from last week to extend.

Commitments of Traders

Speculative net futures trader positions as of the close on Tuesday. Net short denoted by - long by +.

• EUR +23 vs +33K prior
• JPY -87K vs -88K prior
• GBP +46K vs +34K prior
• AUD +3K vs -4K prior
• CAD -34K vs -37K prior
• CHF +11K vs +14K prior
• NZD +20K vs +18K prior

The net Australian dollar climbed into positive territory for the first time since May. Some euro bulls cleared out just as EUR/USD began to rally. Cable positioning is getting a bit crowded.