Draghi Prattles, Dollar Rattled

Draghi made a half-hearted attempt to talk down the euro but the inevitability of the taper ensured his efforts failed. The euro led the way in a broad dollar rout. A handful of notable events are coming up in Asia-Pacific trading. A new USD trade has been added, bringing the number of open trades to 5; 3 in FX and 2 in indices.

Draghi confirmed the inevitable in his press conference, that the ECB will make some kind of decision in October regarding the QE programme. Leaks later showed that the staff was preparing a set of options that would give the Governing Council to buy more bonds but the market continues to push the narrative that a taper is certain. That meant a quick rally to 1.2059 before a pullback ahead of the cycle high.

As the euro climbed, the US dollar sagged -- partly due to the incredible hurricane that's headed towards Florida. The path is still uncertain but the most-likely forecast takes it straight towards the Miami area in what would be another hit to GDP. We send our thoughts to those in its path and expect the dollar to bounce if the forecast shifts.

The bond market continues to warn about trouble in the US despite a bill to extended the debt ceiling. Ten-year yields hit 2.03%, which is the worst since election night. That helped to send USD/JPY to 1.0804, which is the low since April.

USD/CAD was in the spotlight as flows took over and pushed the pair down to 1.2119, breaking the May 2015 low and setting up a test of 1.20.

The Australian dollar finished at the best levels of the day and 80 pips above the Asia-Pacific lows. It will be in focus later with July home loan numbers expected to show a 1.0% increase at 0130 GMT. That will be followed by an appearance from Debelle at 0300 GMT.

Japan is likely to get some enthusiasm-dampening news with 2Q growth expected to be revised down to 2.9% from 4.0% in the last revision. Also on the agenda is a key speech from the Fed's Dudley at 2300 GMT. He's the final core member on the schedule before next week's FOMC. George also speaks at 0015 GMT.