TradingFloor.com highlights: Dovish ECB sends Euro into nosedive

MACRO: Dovish Draghi in difficult balancing act

Steen Jakobsen, Chief Economist at Saxo:

“Mario Draghi, the president of the European Central Bank (ECB), was more dovish than most market participants had expected in his comments following the bank’s monetary policy meeting on Thursday which left interest rates unchanged. The market’s immediate reaction to was to send the euro tumbling by about 100 basis points against the dollar. The very difficult task facing Mr Draghi is trying to balance a very negative economic outlook with the threat that the ECB’s outright monetary transactions programme is taking the tail-risk off in terms of the peripheral interest rate. The ECB is now facing a year-on-year trend growth of minus one percent (contraction) and not a revival  and that is what Draghi is trying to balance and is the reason why we will see some sort of reaction to the euro,  not just today but over coming days as well.” 

FOREX: ECB meeting could mean highs are in for EURUSD

John Hardy, Head of FX Strategy at Saxo:

“The highs may be in for EURUSD after this ECB meeting, even though Mr. Draghi left much unsaid. Firmer conviction for a call that the highs are in would come with a close below 1.3300. The bottom line is this was a fairly dovish performance from Mr. Draghi, but far more for what was said between the lines than for what was said directly. Yes, the general statement saw president Draghi suggesting that inflation rates would likely fall below the 2 % target eventually and that there are downside risks in the economy, though things seemed to be stabilizing at a low level. Among the risks, the exchange rate was mentioned, and the mere mention of it as a factor saw the Euro rushing lower against the USD, JPY and GBP.” 

COMMODITIES: Brent receives a geopolitical bid from Iran

Ole Hansen, Head of Commodity Strategy at Saxo:

“Brent crude oil has been ticking higher following some tough rhetoric from Iran’s highest authority, Ayatollah Ali Khamenei, who today has rejected an offer of direct talks put forward by US Vice President Biden last week. The talks was meant to look into ways of solving the stand-off over Iran’s nuclear intentions which triggered the now months long embargo on Iranian oil from Europe and US. With Brent receiving a geopolitical bid the spread to WTI crude has widened again, currently trading up to 20.7 USD/barrel. Next level of resistance on Brent crude will be the September high at 117.95 USD/barrel.”