Morning Commentary: Same Old Same Old

Foreign Exchange - Morning Commentary
Same Old Same Old
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Alan Rose
Alan Rose
Foreign Exchange Senior Trader
Foreign exchange markets remain hopeful for something to ignite some passion and energy to break out of the multi-month pattern of general consolidation and congestion zones. Today was a potential opportunity with both the ECB monetary policy meeting and U.S. CPI taking place (details below) to move the needle by virtue of any surprises that were not already baked into market expectations.
Up until just a few minutes ago, both the U.S. CPI data and the ECB announcement to leave interest rates unchanged at 0.0% hardly moved the needle. However, over the last 30 minutes or so, ECB President Mario Draghi, in his post-meeting press conference, continued to paint a picture of ongoing geopolitical concerns and EZ weakness and stated that the ECB was prepared to act; this has finally caused the euro and other European major and emerging market currencies to weaken. European equities are slightly higher while G7 interest rates are lower.
U.S. CPI for March saw the headline number come in stronger than expected at 0.4% bringing the YoY rate up from 1.5% to 1.9%.  But core prices (ex-food and energy) came in weaker than expected at 0.1% bringing the YoY rate down from 2.1% to 2.0%. U.S. interest rates were largely unchanged at the release of the report but have been dragged lower on the back of the dovish comments from ECB President Draghi. Most of the foreign exchange price action has probably already occurred for today and the foreign exchange markets will remain in narrow and quiet ranges.
  • The British pound is outperforming other European currencies this morning on the back of better-than-expected economic data. While the U.K. trade deficit was slightly larger than forecast, industrial production jumped by 0.6% against expectations of a gain of only 0.1%. Construction output rose by 0.4% versus expectations of a drop of 0.4%. U.K. interest rates are nearly unchanged while other G7 interest rates are all lower.
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