Euro leaps to more than two week high ahead of central bank speeches

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14 November 2017

thomasdodds

The Euro jumped back above the 1.17 level against the US Dollar this morning for the first time in more than two weeks, as renewed risk appetite among traders caused a rally in more risky currencies.

W
ith this morning’s Eurozone growth data expected to show that the economy grew by a robust 2.5% in the third quarter of the year, investors are becoming increasingly confident regarding a solid growth backdrop in the Euro-area. President of the European Central Bank Mario Draghi is expected to reaffirm policy will remain accommodative and supportive of growth in the currency bloc during his speech at 10:00 UK time. Another hint from Draghi that the ECB will remain both patient and persistent with their stimulus programme could lead to a renewed sell-off in the common currency.

This morning is set to be a particularly busy one in the currency markets with a number of speeches from central bank heads expected to create a volatile trading environment. Federal Reserve Chair Janet Yellen, Bank of Japan Governor Kuroda and Bank of England Governor Mark Carney will all be speaking alongside Draghi this morning.

Sterling falls as inflation remains unchanged in October

Ahead of Carney’s speech today, Sterling edged marginally higher against the US Dollar during London trading on Monday, although erased all of yesterday’s gains after this morning’s inflation data.

Consumer prices growth in the UK unexpectedly remained unchanged in October from a month previous. Headline inflation again printed at 3% last month after investors had eyed an acceleration to 3.1%, while the core measure was also unmoved at 2.7%. While somewhat disappointing for Sterling bulls, this still remains far above the central bank’s inflation target and at an elevated enough level that would lead us to think another interest rate hike remains very possible in the UK in 2018.

Aside from Carney’s speech, the UK labour report is next up for the Pound on Wednesday morning, with BoE members Haldane and Broadbent also lined up to speak tomorrow.

US Dollar edges lower on renewed risk appetite

With investors favouring riskier currencies this morning, the US Dollar edged down towards its lowest level since late-October.

Given the barrenness of the economic calendar on Monday and Tuesday across the pond, US Dollar traders will likely take their cue from the host of central bank speeches this morning, while having one eye on Wednesday’s US inflation and retail sales data. News on the likelihood that Donald Trump will be able to force through his tax reforms in 2018 could, however, prove to be the major mover for the USD this week. Concerns that corporate tax cuts may not come until 2019 has sent the Dollar almost one percent lower against its major peers since the beginning of last week alone.