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Fighting talk from Draghi but Euro still suffers

Fighting talk from Draghi but Euro still suffers

Following a slow start to the week, we may see movement today from the Pound as we await the results of the consumer price index. The annualized figure is expected to rise to 0.3%, up from its previous figure of 0.2%. However, the core consumer price index is not expected to beat its previous figure of 1.4% – the market expectation is 1.3%. The MoM figure may not have much of an effect since the impact of lower energy prices has already been priced in, although core CPI will have a significant role to play in the movement of Sterling today.

The Euro gave up some of the previous weeks’ gains against the Dollar following Draghi’s dovish comments yesterday. Draghi stated that the European Central Bank (ECB) is ready to do its part to combat poor inflation and he reiterated “the Governing Council will review and possibly reconsider the monetary policy stance in early March”. EURUSD fell to a one-week low of 1.1127 at the European close following his comments, however the Dollar lost momentum and the pair bounced back to open at 1.1157 this morning. On the data front, slightly overshadowed by Draghi, the trade balance came in worse than expected at 24.3B vs an expectation of 27.5B, putting additional downward pressure on the Euro.

Following President’s day yesterday it’s another quiet day for the Dollar with few key economic releases from the States. Despite this, the Greenback stood tall against the Yen and Euro yesterday as a bounce in equities and crude oil prices tempered the global risk aversion that battered the Greenback last week. The Dollar has also gained more than 1 percent versus the Swiss franc so far this week, after slipping to a four-month low against the currency last Thursday.

It is expected that the US Dollar will remain under pressure versus the G10 funding currencies as a US rate hike looks less likely this year. However two relatively new regional Federal Reserve presidents, Neel Kashkari and Robert Harker, are scheduled to weigh in on the themes that have been key talking points for market participants: growth forecasts and monetary policy. Although the presidents are not voting members this year, their hawkish tone may influence the votes of others.

Data to watch: 9.30am UK Producer Price Index, PPI Core Output, PPI Input, Consumer Price Index & Core CPI. 3pm US NAHB Housing Market Index. 9.30pm US API Weekly Crude Oil Stock .

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