20 January 2017


The dollar gave up some of Wednesday’s gains in early trade yesterday. There was no real catalyst in a market waiting for the early afternoon ECB policy announcement and press conference but bulls are certainly a little nervous of (too) strong dollar chat from the Trump camp.

It was fairly quiet otherwise but sterling did manage to trade with a positive bias again following Wednesday’s downside correction.

Once again ECB President Mario Draghi risked the wrath of Germany as he blamed the rise in inflation on energy. With German inflation at a 3-year high, the powerhouse of Europe wants the ECB to at least take the foot off the QE gas but it’s just not happening. ‘There are no signs yet of a convincing upward trend in underlying inflation’ Draghi said and that, along with the view that risks remain to the downside, was enough to ensure the euro was pegged back once more. The weaker euro has been such a major factor in the economic recovery and Draghi wants to keep it that way.

The dollar was on the front foot into the North American session as initial jobless claims, housing starts and the Philadelphia Fed manufacturing index all bettered consensus. However, there was another round of dollar selling which began towards the end of the European day and extended into last night’s close, most likely a final round of position adjustment ahead of the President-elect becoming the President.

UK retail sales this morning hog the data headlines. Consensus suggests a mixed report with declines expected from last month on both headline and core but a decent pick up from last December is anticipated. This afternoon, all eyes will be on the Presidential inauguration with particular emphasis on fiscal stimulus, trade and reference to the dollar.  

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