ECB leaves rates unchanged ; Draghi announces details of asset-buying program
The ECB left rates unchanged at 0.05% and Chairman Draghi announced some details of the new European asset buying program. For the last few weeks the market had been anticipating and wondering what, how much, from whom and when the ECB would begin buying assets, and today we got the answer. Mr. Draghi announced that the ECB will begin buying covered bonds in mid-October and ABS from Q4 of this year. Mr. Draghi announced that the program will last two years and these measures should push inflation closer to the 2% target the central bank has. The ECB was unanimous in its decision and is ready for additional measures if needed. The euro was mostly unchanged on this news, only rising slightly off of 2 year lows, as more specific details of the program will be released at 9:30am EST through a press release. So for now, the market will continue to wait and see on that.
It was a fairly quiet night in Asia ahead of this morning’s ECB rate decision and press conference. The Australian dollar was the big winner following some better than expected building permits for the month of August while the yen strengthened in what has become an oversold market. Most currencies moved up a bit against the dollar as the market is finally beginning to question this one sided move that began in May when the ECB first acknowledged they would initiate some kind of asset buying program. Stocks were a sea of red in Asia and for most of Europe as the market mostly anticipated a disappointing statement from the ECB Chairman, as he has delivered too often in the past.
In the US, Challenger Job Cuts were a touch lower than expected at +30k versus +40k expected. This report, which provides information on the number of the announced corporate layoffs by industry and region, had no impact on markets ahead of Chairman Draghi’s address. US weekly jobless claims were +287k, an unexpected decline from last week, and August factory orders are still to come at 10am. The market is expecting a 9% drop for August after a strong 10% rise in July. The US dollar has risen over 3.5% in the last month alone and in some cases it is beginning to consolidate, leaving many on Wall Street asking if it is time to take profit. USDJPY took a brief look over 110 and USDCAD took a brief look over 1.12 but both currencies are mounting a marginal comeback into the second half of this week. Looking to Canada, data is scant this week as the RBC Manufacturing PMI missed slightly this morning, coming in at 53.5 against expectations of 54.5.
US non-farm payrolls for September is the next big event tomorrow at 8:30am. Following six straight months of +200k-plus prints, the US missed the mark badly in August and the market is anticipating a solid bounce back now that the summer has ended. With Q3 growth expectations centered around 3%, tomorrow’s number should be around +200K with a chance for a positive adjustment to August’s dismal +142k number. US data has begun to wane a bit here, notably yesterday’s Manufacturing PMI. US dollar bulls will need a strong NFP print to continue this bullish run.
Have a great day!
Stephen Casey
Senior Foreign Exchange Trader and Market Analyst
The ECB left rates unchanged at 0.05% and Chairman Draghi announced some details of the new European asset buying program. For the last few weeks the market had been anticipating and wondering what, how much, from whom and when the ECB would begin buying assets, and today we got the answer. Mr. Draghi announced that the ECB will begin buying covered bonds in mid-October and ABS from Q4 of this year. Mr. Draghi announced that the program will last two years and these measures should push inflation closer to the 2% target the central bank has. The ECB was unanimous in its decision and is ready for additional measures if needed. The euro was mostly unchanged on this news, only rising slightly off of 2 year lows, as more specific details of the program will be released at 9:30am EST through a press release. So for now, the market will continue to wait and see on that.
It was a fairly quiet night in Asia ahead of this morning’s ECB rate decision and press conference. The Australian dollar was the big winner following some better than expected building permits for the month of August while the yen strengthened in what has become an oversold market. Most currencies moved up a bit against the dollar as the market is finally beginning to question this one sided move that began in May when the ECB first acknowledged they would initiate some kind of asset buying program. Stocks were a sea of red in Asia and for most of Europe as the market mostly anticipated a disappointing statement from the ECB Chairman, as he has delivered too often in the past.
In the US, Challenger Job Cuts were a touch lower than expected at +30k versus +40k expected. This report, which provides information on the number of the announced corporate layoffs by industry and region, had no impact on markets ahead of Chairman Draghi’s address. US weekly jobless claims were +287k, an unexpected decline from last week, and August factory orders are still to come at 10am. The market is expecting a 9% drop for August after a strong 10% rise in July. The US dollar has risen over 3.5% in the last month alone and in some cases it is beginning to consolidate, leaving many on Wall Street asking if it is time to take profit. USDJPY took a brief look over 110 and USDCAD took a brief look over 1.12 but both currencies are mounting a marginal comeback into the second half of this week. Looking to Canada, data is scant this week as the RBC Manufacturing PMI missed slightly this morning, coming in at 53.5 against expectations of 54.5.
US non-farm payrolls for September is the next big event tomorrow at 8:30am. Following six straight months of +200k-plus prints, the US missed the mark badly in August and the market is anticipating a solid bounce back now that the summer has ended. With Q3 growth expectations centered around 3%, tomorrow’s number should be around +200K with a chance for a positive adjustment to August’s dismal +142k number. US data has begun to wane a bit here, notably yesterday’s Manufacturing PMI. US dollar bulls will need a strong NFP print to continue this bullish run.
Have a great day!
Stephen Casey
Senior Foreign Exchange Trader and Market Analyst
Gregory D. Alexandr