John J Hardy
Saxo Bank’s head of FX strategy John Hardy takes a closer look at trends and moves in today’s forex charts, including EURUSD, USDJPY, AUDUSD, and EURSEK.
Article / 08 March 2018 at 22:01 GMT

US Wrap: Draghi drops dovish twist to hawkish tweak

FX Trade Strategist /
  • ECB drops pledge to expand bond-buying if needed 
  • US President Trump signs proclamations for new tariffs 
  • WTI oil prices drop 1.3% 

By Michael O’Neill

NY Focus: The US dollar was in demand at the start of the day, and the demand continued throughout the session. European Central Bank President Mario Draghi played a key role.

The ECB did as expected. It left rates unchanged and dropped the reference to buying bonds if warranted. The nascent EURUSD rally was cut short during Draghi’s press conference. He pointed out that although the bond-buying reference was deleted, the statement still includes the promise to run asset purchases until September 2018 or beyond. EURUSD tanked, falling from 1.2444 to 1.2299.

The US dollar rally was broad. GBPUSD dropped from 1.3908 to 1.3782. Brexit issues are still problematic. European Council President Donald Tusk said that the UK must resolve the Ireland border issue before any other discussions.

USDJPY traders weren’t bothered by the ECB or Trump’s tariff plans and left the currency adrift in a narrow 105.90-106.28 range.

It was a big (and choppy) day for USDCAD and USDMXN traders. Both currencies mirrored each other’s moves, which were driven by tariff headlines and broad US dollar strength.
US President Donald Trump gave Mexico and Canada a pass on the 25% steel and 10% aluminium levies “as long as the NAFTA negotiations are in place".

 Dovish twist ... The ECB left rates unchanged and dropped the reference to
buying bonds if warranted. Photo: Shutterstock

Thursday Focus: Its nonfarm payrolls Friday. The February results are expected to be robust with a 200,000 gain in jobs predicted. The unemployment rate is expected to dip to 4.0% from 4.1% but that news could be offset by a drop in average hourly earnings.  

US dollar demand stemming from this report may be bad news for sterling, especially if the day's UK data dump has already disappointed traders. If so, a test of support at 1.3700 is likely.

GBPUSD four-hour
Source: Saxo Bank. Create your own charts with SaxoTrader; click here to learn more 

– Edited by Gayle Bryant

Michael O'Neill is an FX consultant, currency strategist and author of the Trade of the Day at Follow Mike or post your comment below to engage with Saxo Bank's social trading platform.
08 March
John Shaw John  Shaw
I bet the CDN employment numbers will come in softer than expected. We'll see.


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