Article / 20 November 2017 at 22:29 GMT

US Wrap: Mario Draghi's dovish comments undermine the euro

FX Trade Strategist /
NY Focus: Economic data releases were in short supply on Monday, leaving Forex traders to looking elsewhere for direction. They found it in remarks by European Central Bank Mario Draghi, as well as in German politics, Brexit developments and rising Treasury yields.

ECB president Mario Draghi didn’t say anything fresh or insightful. All Draghi did was to reiterate that the Eurozone economy needs an ample dose of monetary stimulus due to weak inflation. Meanwhile a minor party has walked out on talks with Angela Merkel, leaving the German Chancellor unable to form a coalition government; she may opt for new elections.

EURUSD dropped on the news of the political impasse in Germany, falling from 1.1787 to 1.1727 by the end of the day, just slightly below the mid-point of the November range.

USDJPY rallied from the open, climbing from ¥112.09 to ¥112.70, snapping a one-week downtrend in the process. A modestly better risk tone and rising US Treasury yields underpinned the currency pair.

Sterling traders concentrated on Brexit news. UK Prime Minister Theresa May is reportedly willing to double Britain's “divorce settlement” with the EU, from £20 billion to £40bn. GBPUSD rallied from 1.3255 to 1.3277 initially on the news, but then retraced the entire move, and then some, closing at 1.3232. Broad US dollar strength and concerns that the divorce bill question is far from settled led to GBPUSD selling.

The antipodean currencies and the Canadian dollar finished the session with losses.

Chancellor Angela Merkel may opt for new elections after hitting a political impasse has impacted the euro. Photo: Shutterstock

Wall Street finished with gains. Traders were unperturbed over President Trump calling North Korea a “state sponsor of terrorism” and promising new sanctions. Traders didn’t care that Janet Yellen said she would resign from the Federal Reserve board when her term as chair expires.

Tuesday Focus: Sterling may be centre stage because of the Inflation board hearings. Comments from Bank of England officials combined with the ongoing debate about the EU/UK divorce settlement may inject some volatility into GBPUSD.

GBPUSD has bounced inside a 1.3030-1.3340 range since the beginning of October and is in an intraday uptrend while prices are above 1.3190. A decisive break above 1.3340 would extend gains to 1.3450.

Four-hour GBPUSD chart

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

– Edited by Robert Ryan

For more on forex, click here.

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.


The Saxo Bank Group entities each provide execution-only service and access to permitting a person to view and/or use content available on or via the website is not intended to and does not change or expand on this. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on or as a result of the use of the Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. When trading through your contracting Saxo Bank Group entity will be the counterparty to any trading entered into by you. does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of ourtrading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws. Please read our disclaimers:
- Notification on Non-Independent Invetment Research
- Full disclaimer

Check your inbox for a mail from us to fully activate your profile. No mail? Have us re-send your verification mail