Good morning. Global markets are higher again this Thursday morning, eagerly awaiting ECB Chairman’s press conference after it’s just been reported the central bank took no action on policy at their latest meeting. As is usually the case on days such as this, foreign exchange markets were very quiet during the Asian and European sessions with no significant changes of note. The National Security Council in Turkey announced earlier that a state of emergency has gone into effect but thus far this announcement has not shaken global equity markets (the same can’t be said for Turkey as the Borsa Istanbul is set for its worst week since November 2008). North American markets are poised for a quiet open as Mr. Draghi’s comments should harvest most of this morning’s attention.
On the ECB, it was announced a few minutes ago that the central bank has made no significant change to current policy. This was very much expected, especially after last week’s Bank of England meeting where rates were held firm. Speaking at 8:30am, we could see Mr. Draghi begin to hint at additional stimulus, potentially as early as next month or at least in September, when the European Central Bank will release its updated economic forecasts. The British pound has slumped lower again – this time finding sellers are retail sales dropped by 0.9% in June, much more than economists had predicted. Bloomberg news is reporting a recent poll of Wall Street economists shows a majority believe the UK is headed towards its first recession since 2009. The Japanese yen shot higher overnight following some comments from Bank of Japan Governor Haruhiko Kuroda. Mr. Kuroda, speaking in a BBC radio interview, remarked there was no need and “no possibility” of helicopter money, which sparked the yen to its best day in almost four weeks. Markets continue to be very concerned the BoJ may be out of stimulus bullets and today’s comments will only cause more concern and instability for the yen. As oil prices are stable today, both the New Zealand and Australian dollars are little changed, unable to find a boost with stocks and other riskier assets. The kiwi dollar was initially sent lower as the RBNZ hinted a rate cut could be in the cards, but the dollar has since recovered.
We have a busier slate for the US this morning as weekly jobless claims, house prices, and existing home sales will be rolled out shortly. Housing data has slowly been inching higher over the last few weeks and any significant uptick could provide some strength for the big dollar. Jobless claims are expected to remain well below the psychologically important 300k mark, as only 245k Americans were expected to have filed first-time unemployment claims last week. It has been a very steady week for dollar traders so there is a good chance volatility picks up this morning as Draghi is set to speak at 8:30am. Next Wednesday, the Fed concludes their latest policy meeting and although no rate hike is expected, markets will be keenly observant of any optimistic changes to the accompanying statement. As of right now, the market does not price in any more interest rate hikes for the remainder of this year.
The Canadian dollar continues to tread water, not straying too far from psychologically important technical levels. The bulk of the data for the week is coming tomorrow as May retail sales and June inflation are both released. Inflation should get most of the attention but unless we see a result that is significantly above or below the 1.5% expected it should largely be a non-event. One interesting thing to note this week (first reported by the Bank of Montreal) is that the Loonie is trading higher this week than it was exactly one year ago – the first time in three years such an event has occurred. Markets will have to wait and see if this manifestation marks a significant sea change for the long-suffering Loonie, but it is an interesting to note and something to keep an eye on. Oil prices are a little higher on Thursday, which could lend support to CAD ahead of Mr. Draghi’s press conference.
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