Morning Report: 06.30 London
- In what could be the event of the month, if not the year, Maria Draghi’s ECB threw caution to the wind by cutting interest rates to zero, expanding Quantitative Easing and providing negative interest rate loans to banks. The latter effectively means the ECB is paying Eurozone lenders to provide credit to households. Markets did not know what to make of this initially, with the euro first plunging by over 1% only to recover and post sizeable gains. Stock markets had an opposite reaction, with the main indices closing lower. Confusion reigns as to what is going on here – Some have interpreted this as the markets believing the rate cutting cycle is over in Europe, while others believe it could be markets thinking ‘you know, this could work’ and pricing in a euro recovery.
- This morning, the euro is down slightly, but will have some way to go to erase yesterday’s gains.
- By contrast, the US dollar is down slightly again.
- Oil prices dipped slightly yesterday, but remain within a days session of $40 again.
- Other currency moves were relatively muted yesterday, with the AUD/ JPY continuing its recent strong run.
Coming up today:
- Today we have UK trade balance at 09.30.
- From 13.30, we have Canadian employment change data released alongside the unemployment rate.
- US import prices are released at 13.30.
Trade Idea:
- The reaction to Draghi’s plans has been spectacular, but central banking moves have often been undone in recent times, especially when they lack specific details as yesterday’s plans have been accused of.
- As such, there’s an outside chance, we could see a counter-reaction on the EUR/ USD.
This is presented as an idea to stimulate fixed odds financial betting ideas and is not financial advice.
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