US Dollar exchange rates take a drubbing thanks to fighting words from ECB's Draghi, US earnings season set to get interesting
- Category: US Dollar Exchange Rate
- Published on Thursday, 26 July 2012 11:50
- Written by Super User
"Still, despite Draghi’s remarks, the reality in Europe remains pretty dismal, so again, today’s rally may is unlikely to prove sustainable" - ETX Capital.
The US dollar (Currency:USD) has seen its fortunes reverse dramatically on the currency markets this morning.
Just as we thought we were in for another bout of equity sell-off's and USD strength the ECB's Mario Draghi pipes up that the ECB will be willing to do 'anything' to save the euro.
Indeed, some investors have taken this as a sign that a full-blown bout of quantitative easing is on the cards.
"The central banker said the ECB is ready to do whatever it takes for the euro, adding the currency is “irreversible”. He further adds that firewalls are ready to work much better than in the past and the euro-area is much stronger than people acknowledge, noting the last EU summit was a real success," says Ishaq Siddiqi at ETX Capital.
Draghi’s comments underpin recent remarks by ECB members such as Nowotny yesterday that the central bank could participate in beefing up current measures, such as increasing the firepower of ESM bailout funds, which would lead the ESM to have a banking license.
"This suggests the ECB is moving closer to undertake QE, which would be a much needed shot in the arm for markets and go some way into forming the fiscal unity the euro-area desperately needs in order to arrest the debt crisis. Expectations for additional stimulus by the ECB will start to heat up ahead of next month’s policy meeting where another rate cut is forecasted at minimum," says Siddiqi.
Still, despite Draghi’s remarks, the reality in Europe remains pretty dismal, so again, today’s rally may is unlikely to prove sustainable especially with plenty of event-risk in the form of upcoming US economic and corporate data today.
Worrying news flow - although overshadowed for now - continues to paint a bleak picture of the EU.
Looking ahead, US earnings from the likes of Exxon, Sprint-Nextel, Facebook and Starbucks will be closely watched.
In terms of US data, pending home sales are key after yesterday’s surprisingly grim new home sales report. Durable goods orders and weekly jobless claims also key tests of economic health, with factory orders holding up well in previous months but recovery in jobs market moderating.
"If all three releases show further deterioration in activity, noises over additional stimulus by the Fed will only get louder and attention will swiftly fall to tomorrow’s 2Q GDP report. ETX Capital sees the DJIA now up 50 points and the S&P 500 up six points," says Siddiqi.