As we commence Q2 of 2014 so far the year has not played out as expected. Indices have faltered near their highs when most have been expecting them to carry on higher with little resistance and the dollar has been far from strengthening. Even the ECB hasn’t been playing ball. The consensus has been for some time now that they would undertake further monetary easing as opposed to just the odd interest rate cut, but Mario Draghi refuses to budge. Yesterday’s softer than expected inflation figures show just how disconnected the President now is from the market as such data would usually have heightened expectations of a move this Thursday, therefore pushing the euro lower, however the single currency moved in completely the opposite direction to what any rational investors would have expected. Often though, this is the case with financial markets, inflicting pain where it hurts most. So all eyes on Thursday’s ECB meeting where Draghi is expected to sit on his hands once again and if no action is taken it’s hard to see the euro’s strength dissipating.
Overnight the RBA left interest rates unchanged and AUDUSD seems happy to continue trading just below 0.9300. With little prospect of a hike from the RBA the recent Aussie strength might struggle to be maintained, but at the same time improving economic conditions make it unlikely to head lower any time soon.
Today will also see a large amount of manufacturing surveys being released across the EU and UK, then later today there’s the ISM manufacturing survey from the US. Unlikely to lead to any significant changes in FX trends, but should be noted nonetheless.