It was hardly death and destruction from the ECB bazooka but Mario Draghi certainly threw his first grenade at yesterday’s press conference by announcing that the market can expect some monetary easing as soon as next month. This led to a marked sell off in the single currency however it was hardly the sort of sell off many had expected as the market has still been left very short on the detail, with the most likely action next month being nothing more than a rate cut. There is also the argument that further easing could actually strengthen the single currency as investors pile into euro denominated assets on the prospect of fresh liquidity boosting prices. The retracement back to 1.3825 where we stand this morning does not mean a test of the 1.4000 level is out of the question, so whilst a few longs might have been flushed out in yesterday’s frantic activity, new positions might be initiated expecting further upside.
This morning is likely to see sterling back in the spotlight as industrial and manufacturing production figures are released, both expected to decline month-on-month. Considering the spate of good data from the UK recently it wouldn’t come as too much of a surprise to see yet another figure release better than expected, which could see GBPUSD have another go at pushing towards the big figure 1.7000.
In the absence of other more major data releases, the focus will be back on the dollar which recently tested the lows that were last hit back in October 2013. The greenback has already bounced, so the big question is, have the fortunes for the dollar finally turned?