Draghi Seeing ‘Green Shoots’?
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Neither Yellen nor Draghi were able to jolt the market out of a slumber on Wednesday but a quiet trend of improvement in the European economy is emerging. French jobseekers fell by 19K compared to +8K expected and the ECB's Coene said GDP forecasts could be revised higher.
The larger statement may have come from Draghi, who said he sees the first signs of confidence returning to the economy. Certainly, the stock market has been seeing the same thing in the aftermath of the ECB QE announcement.
The euro also continues to stabilize. That's not particularly impressive after the recent swan dive but it's a start and with the speculative market still crowded into shorts, there is plenty of scope for a rebound.
On the topic of rebounds, crude initially plunged to a session low after an 8.4m barrel rise in US supply data but later jumped more than $2.50. The API data a day earlier had foreshadowed a large build and that led to a squeeze. The reversal traced out a bullish engulfing formation on the daily chart as well.
In the market, cable was impressive once again as it touched a six-week high at 1.5539. It's nearly wiped out YTD losses as the market increasingly believes the BOE will be the second central bank after the Fed to hike rates.
Looking ahead, two events in the coming hours are in focus. The first is Australian capex data for Q4 at 0030 GMT. It's expected to fall 1.6% after a 0.2% rise in Q3. Companies continue to slash spending in Australia so any good news would largely be shrugged off while a poor reading would solidify worries.
More interesting might be at 0200 GMT when New Zealand releases data on currency sales for January. Wheeler has intervened in the past 6 months and continues to jawbone. It would be a surprise if the RBNZ was still selling.
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