Kay Van-Petersen
PMI data, Q4 growth and GDP figures are on tap in week 43, but central-bank meetings could be the key events, says Kay Van-Petersen, macro strategist at Saxo Capital Markets.
Article / 08 September 2016 at 13:17 GMT

EURUSD struggling to hold 1.13 handle after Draghi speaks

Head of FX Strategy / Saxo Bank
  • ECB president Mario Draghi keeps policy largely unchanged
  • EURUSD rises above 1.13 to intraday high of 1.1325 sparked by Q&A session
  • Returns to sub-1.13 levels as markets reassess Draghi comments
  • ECB kept interest rates unchanged 
 Mario Draghi helped push EURUSD above 1.13 after
maintaining an effective status quo. Photo: iStock

By John J Hardy

European Central Bank president Mario Draghi generally under-delivered Thursday as there was no real change to policy: no moving the date to later, no change to the capital key, negative rates, and percentage of issues permitted to purchase among other things.

The outlook on inflation and growth was very slightly downgraded, with risks seen to the downside.

The one thing he mentioned that could be considered dovish was a mention of tasking committees to study an option for the smooth implementation of quantitative easing which could include some of the things mentioned above at future meetings).

Draghi spent a great deal of time underlining the need for structural and fiscal reforms in the closing statement – including infrastructure underlining a global theme.

In the first question in the Q&A, he said the ECB didn’t discuss an extension of the asset purchase plan – taking EURUSD to an intraday-high so far of 1.1325.

In essence, there has been a knee-jerk reaction higher in euro which is clearly deserved, but it is difficult to say this is sustained much longer. If we close day below 1.1275/50, the bears have a hook for a bigger selloff.

If we close higher, I would expect the rally to die somewhere between 1.1350 and 1.1450.

The peaks and troughs of EURUSD post-Draghi
 Source. SaxoTraderGO

— Edited by Martin O'Rourke

John J Hardy is head of forex at Saxo Bank


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