U.S. Dollar Recovering from Overnight Losses as Draghi Drags Euro Down

USD

The U.S. Dollar may have suffered some losses overnight, but it is currently on an upward trend as a result of European Central Bank President Mario Draghi sounding very dovish in his press conference and the release of strong domestic data. Once more, Initial as well as Continuing Jobless claims are on the decline while Housing Starts registered higher than expected with the previous reading also revised upward.

Chairwoman Janet Yellen spoke in San Francisco yesterday expressing commitment to gradual rate hikes. However, some in the market felt she wasn’t hawkish enough while others believed this shows determination to increase rates three times this year. Odds of a rate hike stand at close to 50.0% for the month of May when we believe an uptick is most appropriate.

 

GBP

The Pound is reversing gains from Asian and European sessions as markets fear that banks are certainly willing to leave London as soon as the UK government invokes Article 50 to separate from the EU. Goldman Sachs is reported to be considering cutting 50.0% of its staff in London adding itself to other big names such as Deutsche Bank.

Prime Minister Theresa May spoke at the Davos Conference, an event receiving heavy criticism because of the disconnect displayed by world leaders, where she explained that Britain is fully committed to globalization. While the speeches given may be nice and good, the conference highlights how decision-makers change tune to appear more cooperative than they really intend. Unfortunately for Sterling, a closer look at what looked like impressive labor data the last two days revealed a fall in the number of people actively working and downward wages.

 

EUR

The Euro is searching for definite direction as markets decipher commentary from ECB President Mario Draghi. As expected, the ECB made no changes to its policies; however, Mario is definitely not looking happy. He believes inflation is not growing at the necessary pace, thus why he agreed to extend QE while facing minor opposition last month.

Furthermore, he stated that he sees ongoing downside risks to economic growth that can only be tackled if fiscal policy matches the efforts on the monetary side. EUR is not getting away from its recent ranges at the moment, but the negativity adds pressure to the shared currency in the near-term.