On Thursday, the U.S. dollar traded under pressure vs. a basket of major currencies, negatively affected by the breakdown in the Republican plan to revise the U.S. health care system, increasing doubts for progress on other reforms promised by the U.S. President Donald Trump, such as tax reform, which would have given the U.S. economy a boost.
The dollar is still being bogged down by issues surrounding the Trump administration, from the failure to pass the Obamacare repeal in Senate to the ongoing investigation into Trump's dealings with Russia. Lead investigator Mueller said that they will be looking into the President's business transactions with Russians in the past.
Data from the US was mostly stronger than expected as initial jobless claims and the CB leading index beat forecasts, but the Philly Fed index chalked up a steeper fall from 27.6 to 19.5. There are no reports due from the US economy today.
The euro started edging lower ahead of the ECB decision as traders reduced their exposure to the event but the shared currency regained ground even after Governor Draghi dropped dovish remarks. The U.S. dollar edged lower to $1.1626 vs. the single currency in early Friday's trading session, declining to its lowest levels nearly two years as ECB Governor acknowledged that growth is picking up but that this has yet to translate to stronger inflation, which he also mentioned isn't quite up to the level for them to start discussing tapering. There are no reports due from the euro zone today, so traders could keep pricing in their reaction that it's only a matter of time before the ECB reduces asset purchases.
Despite some positive news for the UK economy, the Sterling pound declined to an eight-month low vs. the single currency after financial markets reacted to Mario Draghi’s speech, as he said possible changes to policy would be discussed this autumn. In addition, cable fell amid heightened worries of a fraught relationship between the European Union and the UK after Brexit as negotiations from David Davis and the European Union's Michel Barnier showed the two sides disagree over Britain's exit payment. However, UK retail figures rose as much as 0.6% in June point to improved GDP growth in the second quarter following a disappointing Q1. GBP settled at $1.2992 vs. USD, as Britain and the EU shared progress on four days of Brexit talks. Only the UK public sector net borrowing report is due today but the focus could remain on how shaky the economy is looking with Brexit discussions ongoing.
Gold prices edged higher yesterday and settled near a three-week high positively affected by Draghi’s comments as he said ECB policymakers would discuss potential changes to the bank's bond-buying scheme in the autumn, lifting the euro to a 14-month high. The yellow metal rose as much as 0.4%, to settle at $1,244.92, after touching $1,247.48, the highest level since 30th June.
Oil prices declined yesterday retreated from a near one-month high amid fears about abundant global crude supplies. Investors are awaiting Monday's meeting between OPEC and non-OPEC producers in Russia, as they are looking for any signs that Saudi Arabia, world's largest crude producer, may cut its output. U.S. Brent crude for September delivery fell as much as 0.02% to settle at $49.29, while West Texas Intermediate futures for September settled at $46.91.
The most important economic events:
The prices and news mentioned in this outlook are absolutely no guarantee of future market performance and do not represent the view of ICM Capital Limited. Financial markets can move in either direction causing profits to be made or complete losses to be incurred by the trader. Each trader must decide for themselves what their risk appetite is and ensure that correct risk management procedures are in place before placing any trades.