The Forex Week In Review

The Forex Week In Review

A quiet data week for Forex markets was headlined by the April ECB meeting, the first since the bank announced huge new stimulus measures in March.

The meeting passed as expected with rates remaining unchanged and the bank striking a broadly Dovish tone. Draghi stated the ECB expect rates at present or lower levels for an extended period of time, opening the door for further easing if necessary. Regarding inflation, the ECB noted the likelihood of inflation remaining low and possibly even turning negative again in coming months before picking up into 2H 2016, but cautioned that they would be closely monitoring the evolution of the inflation outlook and, to ensure that the low inflation environment doesn’t become entrenched, would act if warranted by using all instruments in their mandate – though were clear to highlight having never discussed “helicopter money”.

In addition to these comments Draghi also stated that the ECB are not targeting the Euro exchange rate though it is important for price stability and growth, which they noted continues to be moderate and steady despite the persistence of global uncertainties and remaining downside risks.

Finally, the ECB referenced recent Political issues stating that the bank have a mandate for the whole of the EuroZone and not just Germany, railing against recent criticism from German officials, and referencing also the Brexit issue saying that they view UK participation in the EU as mutually beneficial.


  • USD The US Dollar was out of the spotlight last week in the absence of any key data. Moves,whilst limited, were broadly USD positive, with the Dollar still finding support from recent Fed comments leaning towards a possible June hike. Attention now turns to the April FOMC meeting which, although not expected to see the Fed increase rates further, Bulls will be hoping sheds further light on the chances of a June hike.
  • EUR Draghi poured on the Dovish rhetoric at the April ECB meeting noting that rates are expected to stay at present levels or lower for an extended period with the bank ready to act further if the low inflation environment persists.
  • GBP A recovery in risk-appetite this week leant support to the beleaguered British Pound which sustained a second positive week as the latest Brexit polls show growing support for the UK to stay in the EU. The latest earnings and employment data showed that Average Weekly Earnings fell back to 1.8%, the lowest level since 2010, highlighting the BoE’s view that low inflation is weighing on wage-growth
  • JPY The Japanese Yen softened this week as a recovery in risk appetite weighed on safe-haven demand. The upcoming April 28th Bank of Japan now looms large with growing expectation of further easing to come.
  • AUD The Australian Dollar continued to push higher this week, riven mainly by a fresh surge in Iron Ore price (Australia’s biggest export earner) which hit 10-month highs amid a jump in steel prices in China. The RBA April meeting minutes saw the bank citing concern about continued AUD strength amidst a broadly optimistic economic outlook though the bank did also highlight that there was room for further easing if low inflation persists.
  • CAD The Canadian Dollar continues its rampant recovery this week driven by fresh gains in Oil which, despite initial softness on the week in response to last weekend’s failed Doha meetings, was supported over the week by a Kuwaiti Oil worker strike. Canadian CPI on Friday printed well above expectations at 2.1% vs 1.7% on Core.