The dollar took a beating yesterday as investors rushed into the euro following the ECB meeting that saw President Mario Draghi defy market expectations. An increase in growth forecasts and lack of further monetary easing saw the single currency spike with EURUSD hitting a fresh 2 year closing high. Not even sterling was immune to the euro’s advances as EURGBP hit a three week high and this morning it’s knocking on the door of 0.8300. As mentioned in yesterday’s outlook, sentiment towards the single currency has been slowly but surely improving over the past few months and Draghi’s comments yesterday were interpreted to be far more hawkish than had been anticipated, further improving that sentiment. As I write EURUSD is adding to yesterday’s gains printing 1.3870 on the screen with the next near-term resistance level seen at 1.3920.
Looking ahead to today the dollar has a chance to try and regain lost ground with nonfarm data due at 13.30 GMT. Wednesday’s ADP figure disappointed but the two have been polarised in recent months and so yesterday’s initial jobless claims would be a better gauge to try and predict what we’ll see today. The dip will be seen as encouraging for the dollar bulls who’ll be wanting to see a better than expected 149k for USD to even attempt to regain the lost ground from yesterday. Regardless, the bigger picture of course is what this will mean for the taper, continuously on the mind of investors and it’s hard to see much will blow the Federal Reserve off their current course.