Oil prices rallied up $3 to close at $32.70 up nearly 7% for the day

February 4, 2016

Wednesday Trade was Pips Galore for FX Traders!

The U.S. Dollar Index dropped to multi month lows in the wake of disappointing U.S. ISM data, although the ADP employment data was not all that bad. However, the weak ISM report was enough to overwhelm the USD longs.

The EURUSD finally broke out of its multi week trading range and jumped +200 pips to close above 1.1100 for the first time since August 2015 (See my January 4th 2016 post). The EURUSD market has been looking for an excuse to annoy Mario Draghi at the ECB and take the EUR higher, and yesterday’s sluggish U.S. economic data was the kind of catalyst that the market has been looking for.

Oil prices rallied up $3 to close at $32.70 up nearly 7% for the day. The sharp move in oil price helped to support commodity related currencies with the CAD surging gains against the USD which pushed the USDCAD lower by over +260 pips to close near the 1.3780’s and the AUD moving higher by +130 pips.

The GBP broke to the upside and climbed 200+ pips during Wednesday trade, ahead of today’s “BoE’s Super Thursday” with the inflation report to be published alongside the minutes and the policy announcement.

Today’s European calendar has ECB economic bulletin, ECB speech from Draghi. The U.S. calendar has weekly jobless claims, prelim Q4 productivity, and factory orders. While the Canadian calendar quiet, employment, trade and Ivey PMI all due Tomorrow.

Main Macro Events Today

EUR ECB President Draghi’s Speech: Draghi sends dovish signal. Speaking at a conference in Frankfurt the ECB head said monetary policy can’t be relaxed about the series of supply shocks, adding that Euro-area challenges are no reason for ECB inaction and that adopting a wait and see attitude would carry risks and that “the risks of acting too late outweigh the risks of acting too early”.

GBP BoE Interest Rate Decision: BoE expected to keep policy on hold, focus on minutes and inflation report.

USD U.S. Initial Jobless Claims: U.S. initial jobless claims are expected to be 268k (median 280k) in the week-ended January 30.

USD Prelim Non-farm Productivity: Q4 nonfarm productivity should be -3.5% in the first release from 2.2% in Q3.

USD Factory Goods: December factory orders are expected to decline 3.0% with inventories up 0.3%. Forecast risk: downward, given the weaker top line durable inventory numbers. Market risk: downward, as weaker data could impact the path of rate hikes.

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