Euro Soars After Talk of Future Tapering

The main story of the day yesterday was the strong move in the Euro, following the ECB press conference. They announced that talks would begin in October around tapering their QE program. This pushed the Euro through 2016’s high of 1.1616 as traders interpreted this as more of a reason to get on board the Euro train, which has moved 5 big figures in under a month. We think that the market may have got ahead of itself, after no real fundamental change, only talks of talks. For traders looking to sell dollars longer term, we think there may still be an opportunity to enter this somewhat crowded trade on a pull back, as a lot can happen between now and October.

News from the Trump camp didn’t help things for the dollar as Mueller extended his investigation into Trump’s business dealings with Russian counterparties. This includes property transactions dating back to 2008, well before any talk of a Trump presidency, and where there is bound to be some skeletons hiding in the Trump family closet. Eventually something has got to stick!

The Sterling showed signs of life following a tough week after a retail sales beat of 0.6% over 0.4% exp. The BoJ came and went amidst talk of one day reaching their 2% inflation target fantasy. In other central bank news the Rand came under pressure after a 25bp rate cut in South Aftrica.

To round off the week in the way of top tier data, we have Canadian CPI and Retails Sales which is expected to come in at -0.1% and 0 respectively. A beat here will help the BoC towards raising rates again at the next policy meeting. A bit closer to home, we have RBA Assistant Governor’s Debelle and Bullock speaking. Traders will be looking for continuity after Governor Lowe’s positive comments about the Australian economy last week.

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