Talking Points:
- US Dollar Rebounds, Aussie Dollar Drops on RBA Rate Cut Bets Overnight
- Euro May Rise if ECB President Draghi Hints QE Program Can Be Cut Short
The US dollar outperformed in overnight, rising as much as 0.2 percent on average against its leading counterparts. The move appeared corrective after the greenback suffered its largest drawdown in two weeks over the preceding 24 hours following a disappointing US Retail Sales report. The Australian dollar proved weakest on the session. The move played out alongside a drop in front-end yields, pointing to building RBA rate cut expectations as a likely catalyst behind selling pressure.
A monetary policy from the European Central Bank headlines the economic calendar in the hours ahead. Officials are locked into a QE effort with defined scope (€60/month in asset purchases through September 2016), so tangible news on the policy mix is unlikely. The press conference with ECB President Mario Draghi will have market-moving potential however.
The eurozone economy has shown some signs of life in recent months and the central bank chief will almost certainly have to field questions about the possibility that QE will be cut short if growth and inflation mend faster than expected. Rhetoric opening the door to such a possibility may be interpreted as a relative shift away from the ultra-dovish extreme on the policy outlook spectrum, boosting the Euro.
