Euro volatile ahead of ECB tomorrow; Greenback up

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Euro volatile ahead of ECB tomorrow; Greenback up

SEPTEMBER 11, 2019

The U.S. Dollar is looking slightly better against the Euro and some of the major counterparts in Scandinavia as markets prepare for the European Central Bank meeting tomorrow.

Overview

While the Euro-zone is to be concerned about the decision, other currencies such as Norwegian Krone are down also as the price of oil slipped yesterday. The departure of John Bolton as U.S. National Security Adviser was interpreted by markets as less friction for oil-producing countries, thus supplies are expected to increase as tensions with countries such as Iran could subside.

This, in turn, did not negatively impact the Canadian Dollar nor the Mexican Peso, currencies that have stopped the bleeding against the greenback that they suffered throughout the summer. As global equities look hopeful, expect risk-appetite to rise if the ECB does announce an easing package tomorrow. We shall see how much of an impact this will have on FX flows since intervention announcements by both the Fed and the Reserve Bank of Australia surprised with appreciation rather than a loss in value.

What to Watch Today…

  • No major events scheduled for today.

Complete Economic Calendar can be found here.

JPY

The Japanese Yen is trading at its weakest point against the buck since the beginning of August based on the fading of risk-aversion across global markets and developments in China regarding domestic policies to create a cushion while engaged in a trade war with the U.S. The editor of China’s Global Times news stated that the government will announce measures that would “benefit some companies from both China and the U.S.”

Much of the Yen’s strengthening this year has been based on its safe-haven status as the tariffs conflict escalated, but now with an eye more towards solutions, the Yen is likely to see dwindling times as we close the year. Prime Minister Shinzo Abe is likely going to keep power for the next few years as he has been re-elected several times, thus the consistency of his rule and perceived stability could propel Yen higher any moment the rest of the globe looks chaotic.

EUR

The Euro is at its lowest point since the of August, thus erasing the gains it had achieved in September thus far. Speculation indicates that the ECB might not have a unanimous decision to announce and if there is surprise hawkishness in their statement without too large of an easing package, Euro could return to better fortunes.

We predict easily that Germany will be a point of focus and questions will come regarding how Christine Lagarde may change the ECB’s approach. President Mario Draghi has been the staunchest defender of the Euro and the agreement, but his lowering of interest rates to zero and going negative on the Deposit rate have angered finance ministers from “savers” countries such as Germany.

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