The EUR/USD traded weaker on Wednesday after the European Central Bank left its key interest rates unchanged at historical lows. The central bank left its benchmark interest rate unchanged at a record low 0.05 percent, its deposit facility at -0.20 percent and the marginal lending facility at 0.3 percent.
In today’s post-ECB meeting press conference, President Mario Draghi preached about the positive effects of the central bank’s bond-buying program. He also added that he has no plans to stop short of the plan to keep on buying bonds through September 2016. Draghi didn’t say too much about yesterday’s big jump in consumer inflation, but hinted that the central bank remains focused on developing a strong inflationary trend.
The ECB raised its consumer inflation forecast to a 0.3% annual rate versus a previous estimate of 0.0%. The 2016 inflation projection was left unchanged at 1.5%. The ECB’s policy target is for annual inflation near but just below 2.0%.
Draghi also said the Euro Zone recovery is on track and the central bank’s aggressive easing program is helping to ease credit conditions. He also offered no details about the Greek negotiations, but added that any agreement needs to be fair while addressing growth, but it also must be fiscally sustainable.
The GBP/USD also traded lower as traders reacted to today’s reports while paring positions ahead of Thursday’s Bank of England monetary policy meeting. Today’s session began with the release of the Nationwide HPI report. It showed a reading of 0.3% versus the estimate of 0.4%. U.K. Services PMI came out well below the estimate. Traders were pricing in a figure of 59.2. The actual report showed a reading of 56.5. Tomorrow, the ECB is expected to leave its benchmark interest rate unchanged as well as current stimulus levels.
The U.S. Dollar rose after the release of today’s slightly-better-than expected ADP Non-Farm Employment Change report. ADP said the private sector of the economy added 201k jobs versus an estimate of 198K. The stronger dollar pressured August Comex Gold futures, but the market remained relatively range bound. Based on the recent price action, it looks as if investors are content with holding the market around the $1188.30 level until there is definitive news about U.S. interest rates.
July crude oil futures are trading steady-to-lower. Volume and volatility are down as investors await today’s inventory report. The weekly Energy Information Administration report is expected to show another drawdown. Traders are pricing in a decline of 1.9M barrels. Last week, inventories declined for the 4th straight week.
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