Euro Hits 8-Month High, NZD Jumps

Draghi steered clear of any bold policy pronouncements and Letta survived a confidence vote. The yen was the best performer while the Australian dollar lagged. China is closed for holiday.  

The market was positioned for some dovish rhetoric from Draghi but when he delivered comments that echoed last month, EUR/USD squeezed higher. Draghi maintained a slightly upbeat outlook on growth and promised to continue to do whatever it take, including another LTRO.

The euro also gained on an Italian upper house confidence vote in favor of Letta. It ends the political crisis in Italy and marks a decline in Berlusconi's influence.

The third factor that boosted EUR/USD was on the US dollar side of the trade. ADP employment was at 166K compared to 180K expected and the prior was revised lower. Initially EUR/USD was hesitant to react with Draghi's press conference just a few minutes away. After he made it clear there would be no bold new policy pronouncements, EUR/USD jumped to 1.3607 from 1.3510. It was the highest since February.

Late in the day, surprising comments crossed from RBNZ leader Wheeler. He said the central bank currently expects interest rates to rise by 2 full percentage points from 2014 to the beginning of 2016. It's a surprise, and meaningfully bullish comment. The kneejerk pushed NZD/USD to 0.8322 from 0.8260.

The gridlock continues in Washington and Democrats continue to refuse negotiations, betting the public will blame Republicans. It's always possible we see a rapid change in tactics as polls are released but for now there is no progress, although evening meetings are scheduled.

Coming up later, Australian releases the AIG Services PMI at 2330 GMT. The prior reading was 39.0. The Chinese non-manufacturing PMI will be released at 0100 GMT. The prior reading was 53.9.