ECB's 'Open-Mind' Hits The Euro

Market Brief

The FX markets displayed high volatility yesterday amid the ECB cut its refinancing rate by 25 basis points down to 0.50%. The ECB President Draghi delivered a dovish speech in his press conference; he reiterated that the ECB will remain accommodative as long as needed and significant easing in financing conditions will be considered despite 'serious unintended consequences' .

Euro registered important swings, the volatility spiked. The most spectacular move was seen on EURJPY. The currency pair registered a sharp upside move from 127.66 to 129.91 and quickly sold-off to 127.50 as the ECB President Draghi said he is 'open-minded' regarding the negative interest rates. On a similar pattern, EURUSD first rallied to 1.3218 and rapidly eased to 1.3037. After a tight range trading in Asia, EURUSD rallied above 1.3100 in the European opening.

During the overnight trading session, the Asian stock markets mostly ended the week in the positive territory while Tokyo was closed. The Hang Seng advanced 0.25% and Shanghai's Composite surged 1.56% even though the Chinese PMI Services expanded at slower pace in April. USDJPY and its crosses went through a quiet trading session. USDJPY consolidated gains around 98.00, after hitting 98.40 on ECB rate cut.

Elsewhere, Aussie kept weakening against NZD. Bloomberg reported that the pair recorded the longest run of weekly declines in 12 years. The Australian producer prices advanced 0.3% in the first quarter versus 0.2% in Q4.

The key event this Friday is the US payrolls and unemployment data to be released in the afternoon. The markets do not expect any change in US unemployment rate in April. The jobless rate is anticipated to remain at 7.6%, while the nonfarm payrolls will hopefully print a better performance than last month's disappointment.

Today, the markets will watch Norwegian April PMI and Unemployment, UK April PMI Services, Euro-Zone March PPI m/m & y/y, US April Change in Nonfarm Payrolls, Private & Manufacturing Payrolls, US April Unemployment rate and US April ISM Non-Manufacturing Composite.

IMOH, Clement I.
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