Financial market research and analysis

Upbeat quarterly results from big names on Wall Street saw all three major US indices close higher. However, gains were capped by continued concerns over slowing global growth and the still unresolved trade issues. The mixed sentiment resulted in a subdued session in Asia. Europe is also pointing to a lacklustre start to trading as investors look ahead to the ECB rate announcement and a possible end to the US government shutdown

Dovish Draghi To Weigh On Euro?

The euro is clinging on to its recent jump higher versus the dollar as investor attention turns squarely to the ECB. The ECB will give its monetary policy announcement at 12:45 GMT today.  This will be followed by a vote in the US senate on the US government shut down at 19:30 GMT. With both the ECB announcement and the US Senate vote, EUR/USD could be in for a rocky ride.

The ECB is expected to keep policy unchanged. Traders will quickly turn their attention to President Draghi’s press conference. Recent data has shown that inflation has weakened to 1.6% down from 1.9%, manufacturing activity and consumer confidence have also softened. Concerns over the slowing of momentum in the economy have been expressed by ECB policy makers over the past few weeks. There is little doubt that Draghi will hit a dovish tone in the press conference as he highlights economic developments are weaker than expected with global risks still prominent.

Should the ECB reduce its inflation forecasts and Draghi focuses his speech on weaker growth and increasing risks, investors will quickly push back hopes of a rate rise. This euro could tumble through $1.13, heading towards $1.12.On the other hand, some of the downside is already priced in, so should Draghi adopt a slightly more optimistic tone, then the euro could pick up quickly.

End of US Government Shutdown In Sight?

The US senate will vote today on Democrat proposals and a short tern funding bill which could end the US government shutdown. The shutdown is now on its 35th day, however tensions between House speaker Nancy Pelosi and President Trump remain elevated. The broad expectation is that the vote will fail, resulting in the continued shut down of the government. A surprise passing of the proposals in the Senate could see the dollar surge back into life.

Pound Just Shy of $1.31

As hopes of Brexit being delayed gained traction, the pound rallied to within a breath of $1.31, its strongest level since early November. With little in the way of economic announcements the pound will be trading to the tune of Brexit headlines.

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