Euro Struggles Point to Troubles

MNI published a sources story saying the ECB won't cut ahead of Thursday's announcement. That's not a big surprise but the lack of sustained upside in EUR/USD is worrying. The Canadian dollar was the top performer while the yen lagged. Up next is the Australian employment report. Today's Premium Insights added 2 new EURUSD trades and 1 USDCAD short ahead of Thursday's ECB meeting, US and Canada jobs reports.

MNI is best known for its 'ECB sources' stories because they have a long track record of accuracy (although they aren't 100%). They cited a senior eurosystem source saying the ECB doesn't want to overreact to a single data point and that price expectations are firmly anchored.

EUR/USD jumped to 1.3549 from 1.3515 on the headlines but what's interesting is the lack of follow through and eventually the gains faded away. A number of analysts have backed away from rate cut calls after last week's rush to predict them. We have maintained the ECB won't cut rates.

The inability to hold euro gains on the MNI story suggests the market has already priced in no rate cut. That could mean some quick selling on a kneejerk higher in EUR/USD announcement.

That leaves Draghi's communication as the main factor. We struggle to believe Draghi will strongly hint at a cut in December but given the market's unwillingness to bid up the euro today, even with the positive German manufacturing data, we're skeptical.

Coming up at 0030 GMT, Australia releases the October jobs report. The Aussie has been flying high on upbeat data this week and expectations are modest with a 10K consensus on jobs and unemployment forecast to tick to 5.7% from 5.6%. As always, watch the breakdown of full-time/part-time jobs.