Euro struggling ahead of ECB meet

27 April, 2017

In the last 24hours, the our prop desk has booked some healthy profits on long EUR positions and also benefitted from that brief rally in oil prices. Assorted long GBP trades – some of which have been open since Easter – remain in play and are broadly positive.

The ECB rate meeting is high on the agenda for many traders with the Euro by all accounts still a little way adrift of where it should be on the assumption that Macron becomes the next President of France. Developments in the US stand off with North Korea will also be under scrutiny, although right now this seems to be more about posturing and hopes remain that a diplomatic solution may still be found.

The common currency is struggling to find further support ahead of today’s ECB announcement over monetary policy. There have been some suggestions that the greater clarity over the outcome of the French Presidential election – and the inevitability of a Eurosceptic winning – means that some policy tightening will be seen in the not too distant future, but it’s as if markets want reassurance of this before making another push higher. The bank’s press conference starts at 12.30pm GMT, but if we hear even just some modestly hawkish tones coming out here, the expectation would be for the Euro to find some renewed support

US Durable goods order data is slated for release at 12.30pm GMT today and expectations are that we’re going to see growth here, albeit at a slower pace than was posted last month. If this doesn’t prove to be the case and we see a print above 0.5% then that will once again put the focus back onto the Federal Reserve to consider pushing through that next rate hike. Such a move is clearly unpopular with Donald Trump who wants to see a weaker US dollar to help facilitate trade, but the prospect of mounting inflationary pressures will demand a reaction from the Fed.

Gold process ticked a little higher yesterday with the shipping of almost all US senators to the White House for a briefing over North Korea raising some concerns. However, with little new information emerging from the session, it looked more like a sabre rattling move than an indication that intervention was imminent. The White House said the briefing took place there rather than on Capitol Hill for logistical reasons – this situation is certainly one to watch, although the mooted reaction fro the precious metal seems appropriate given the fact little progress as been made.

Weekly oil inventories may have provided some momentum for the market yesterday where a bigger than expected draw sent US crude to briefly retest the $50 level, but this proved short lived. The big question is whether Russia will maintain its output cap – Saudi Arabia is due to discuss this matter with the country ahead of the Opec meeting late next month but it seems that assumptions over this will continue to have some significant sway on prices.

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