Draghi sounds worried
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Things didn’t quite go to plan for the dollar on Friday in the wake of comments from Fed Chair Yellen. The tone of her speech at Jackson Hole was largely as expected, taking a softer stance than the minutes seen earlier in the week, but the dollar was firmer as a response, especially against the euro.
The move towards 1.32 on EURUSD was helped by comments from ECB President Draghi, who was sounding more worried regarding the eurozone economy late Friday evening, encouraging governments to do their part with fiscal policy where appropriate. The impression given was that further policy measures were on the way, but the ECB cannot fight the battle on their own.
For today, volumes are going to be on the light side with UK markets closed for a public holiday. The early focus will be with IFO data at 08:00 GMT in Germany. This will be more in focus than usual given the weaker GDP data seen recently and more talk of a slowdown in the Germany economy. The survey of German businesses is expected to show a fall in the headline rate to 107.0, from 108.0. Weaker numbers are likely to weigh on the single currency, especially given the price action seen Friday and the light underlying volumes.
Thereafter, PMI data is seen in the US, together with new home sales data at 14:00 GMT. Housing data has been improving of late, having been a concern for the Fed for most of last year. This has given further support to the better dollar tone. Whilst the euro is proving to be vulnerable, both sterling and the Aussie are putting up a fight and holding their ground against the dollar. Sterling has now seen seven straight weeks of declines vs. the dollar, a run not seen since August 2008.
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