Key overnight events:
- The ECB expanded its QE program, delivering a package that included a 10bp-cut in its deposit rate to -0.4%, a pledge to buy corporate debt as part of €80 billion of monthly QE purchases, €20 billion more than at the moment, and 4 more multi-year lending operations.
- EURUSD dropped 1.4% to a low of 1.0822 as markets digested the news. Declines were soon reversed during Draghi’s news conference after he stated that policy makers “don’t anticipate it will be necessary to reduce rates further”; EURUSD rallied to as much as 2.2% higher for the day, above the 1.1200 handle, as traders and investors interpreted Draghi’s comments as the ECB reaching the limits of its rate-cutting cycle.
- Volatility spilled over into US equity markets as the S&P 500 Index swung at least 0.8% in both directions before ending the session little changed.
- WTI futures for April delivery slipped 1.2% after failing to breach its previous-day high of $38.51/bbl as uncertainty arose about when a meeting between Saudi Arabia, Russia and other producers to freeze output will occur; there is speculation that Iran has balked at an output freeze as it seeks to rebuild its oil exports.
- The Dollar Index fell 1.1%, the most in a month, on the back of euro strength.
- Bill Gross stated that it’s the “end of the line” for negative rates in Europe and global yields have bottomed, while Mohamed El-Erian wrote that a weaker USD may embolden the Fed to take a more hawkish stance next week.
- Spot 1.3756
- USDSGD failed to test the 1.3900 handle overnight, giving up all its gains after reaching the previous day’s high of 1.3884.
- 1.3728 remains a key support to the downside.
- Spot 0.7494
- After climbing to an 8-month high of 0.7528 yesterday, AUDUSD continues to remain supported above the 0.7400 handle and looks poised to post a second consecutive weekly gain.
- Spot 1.3290
- USDCAD closed below its 200-day moving average for the first time since Sep 2014. Although with crude oil’s overnight decline, the currency pair pared most of its declines, reaching a high of 1.3398.
- Employment data for February is set to be released tonight, with unemployment rate expected to remain unchanged at 7.2% and net change in employment estimated to come in at 10,000, higher than the previous month’s number of -5,700.
- Spot 6.4875
- The PBOC raised its reference rate by 0.34% to its highest this year at 6.4905, as USDCNH fell through the 6.5000 mark to reach an intraday low of 6.4858; last month’s low of 6.4866 – a key support level, is in threat of being broken.
- Reuters reported yesterday that the PBOC is preparing new regulations to allow commercial banks to directly swap non-performing loans with other firms, in return for shares in their companies.
- China is set to report industrial production, retail sales, M2 money supply and new yuan loans over the weekend, with all numbers, except retail sales, expected to come in lower than prior figures.
- Spot 8.5030
- Norway reported CPI for February yesterday; CPI rose 0.5% month-on-month and 3.1% year-on-year, better than the expected numbers of 0.4% and 3.0% respectively.
- USDNOK continues to trade just above the key support level of 8.4465, despite briefly climbing to as high as 8.6095 last night.
- Norges Bank’s policy rate decision is due out next Thursday.