Risk is on!

Daily Analysis - 07/06/2018

Euro surges to $1.18; ending QE is on the table

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Risk appetite is evident in the markets this morning and futures are pointing to a positive day. As a result the U.S. dollar is weak against most of its major counterparts, and the euro being one of the biggest gainers. Global equity markets rallied and Asia extended Wall Street’s run. The Nasdaq Composite Index reached another record high. European markets have mostly opened positive. Frankfurt’s DAX opened strongly and even Italy’s exchanges opened higher.

Euro at 1.20?


The euro put in a good rally on Wednesday and broke key resistance at $1.1750, and is currently into the $1.18 handle. The main catalyst behind the move can be pin-pointed to some hawkish comments by ECB officials, hinting that the central bank is ready to begin hiking rates soon and to end the QE program (quantitative easing). On Wednesday, ECB Chief Economist Peter Praet hinted that the ECB Governing Council will discuss ending stimulus at its policy meeting next week.

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Aussie unfazed by weak data


Australian trade data came in slightly lower this morning, briefly hurting the AUD/USD which slid 20 pips but has retraced half of the drop already, trading in the $0.76 handle.

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Crude oil inventories disappoint


Crude oil fell on Wednesday after there was a surprise increase in inventories. The EIA report showed there was a build of 2.1 mil barrels of oil versus forecasts for a drawdown of 2.0 mil. The previous report released last week showed a big drawdown of 3.6m.  WTI is currenlty trading below $65 a barrel.

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