Intraday Market Thoughts

Draghi Torpedoes Euro

by Adam Button
Dec 7, 2012 0:25

ECB President Draghi forecast lower growth and hinted at rate cuts after the ECB decision. The euro was the worst performer on the day, falling more than a full cent after his comments; the Aussie was the best performer. Australian trade balance is on the Asia-Pacific calendar. Aussie hit the 1.05 target but 1 of 2 EURUSD was stopped out at 1.2960. See more below.

The ECB cut 2013 growth forecasts and Draghi said growth will not begin to recover until the second half of next year. There was no sign of an imminent rate cut but Draghi clearly placed more easing on the table.

The euro tumbled to 1.2950 from 1.3075 after his press conference. Worries that Italys government may collapse added to the decline as Monti narrowly survived a confidence vote.

The pound slumped in sympathy, sinking to 1.6040 from 1.6110, taking out the 55-day moving average on the way down.

US economic data featured jobless claims which improved to 370K compared to 380K. Risk trades were apprehensive ahead of Fridays non-farm payrolls report. The consensus is for 86K new jobs but Hurricane Sandy, holiday hiring and the 15K layoffs at Hostess could mean a big miss.

Guessing NFP is a fools errand. The better information will come from analysing how the market responds to a weaker or stronger number. The market reaction following the initial knee jerk is often telling in regards to the medium-term direction.

Another event to watch out for on Friday is the Canadian decision on the Nexen takeover. The deadline for the deal is Monday but the government may decide to announce if it will approve the giant takeover before the weekend. The result will likely steer CAD direction for the remainder of the year.

In the upcoming session, a busy week of Australian data wraps up with trade balance data at 0030 GMT. The consensus is for a A$2B deficit. The result is unlikely to have a lasting effect as the market begins to hunker down ahead of NFP.

The 1.05 target on AUDUSD from 2 weeks ago has finally hit. GBPUSD (1), EURJPY (1), CADJPY (1), EURGBP (2), Gold (1), Silver (1) remain in progress. US Crude CL_F (2) were stopped out. DIRECT ACCESS here Non subscribers can click here:



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