It has been a relatively calm day in the FX markets on Thursday despite the potential for some volatility given the ECB/SNB Meetings, Brexit uncertainty and the cross flows of risk sentiment. The Euro is trading pretty much unchanged, after a brief dip lower, due to the ECB lowering its 2019 growth and inflation forecasts, while Mario Draghi reiterated that the balance of risks are moving to the downside. As expected, the ECB also halted new bond purchases and promised to maintain policy support for the EU due to risks from trade tensions, as well as Brexit and budget woes in Italy and France. In terms of numbers, EU growth is now projected to be at 1.9% in 2018 (prior 2.0%), 1.7% in 2019 (1.8% prior), 1.7% in 2020 (unchanged) and 1.5% in 2021 (new). Draghi said that risks are “broadly balanced” but balance of risks is “moving to the downside”.
The Swiss Franc is also pretty much unchanged after the SNB retained its negative interest rate policy and pledged to stay active in intervention. Cable is trading to the top end of its recent range after Theresa May won yesterday’s leadership challenge and she is now in Brussels, hoping to exact an improved deal from the EU but with no real expectation of a breakthrough. Risk sentiment generally seems a little improved with US$Jpy generally underpinned, while the commodity currencies are also a little higher. For its part, the US$ received support from Donald Trump’s upbeat comments on trade talks with China and Beijing’s first major purchase of US. soybeans in months.
Elsewhere, US stocks are pretty much flat (DJI/S+P – 0.1%/0.2%), WTI has been choppy but is currently unchanged while Gold is just a couple of dollar/oz lower.
Looking ahead to Friday, the session will see a bit of activity in Asia, mainly from Japan and China, with the main focus being on the China Retail Sales (exp 8.8%yy) and Industrial Production (exp 5.9%yy) for November, but also the Japanese Q4 Tankan Outlook. From Europe, the focus is going to be on the flash PMIs, while the US will have a busy session, which will include the PMIs as well as the November Retail Sales (exp 0.2%), Industrial Production (exp 0.3%), Business Inventories (exp 0.5%) and Capacity Utilisation (exp 78.5%). Have a good weekend.
Economic data highlights will include:
Fri: Japan Tankan, Industrial Production, Capacity Utilisation, China Retail Sales, Industrial Production, Fixed Asset Investment, EU Markit Flash Manufacturing/Services/Composite PMIs, US Retail Sales, Industrial Production, Capacity Utilisation, Business Inventories.
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