Super Mario fends off confetti attack

Wednesday provided a host of data releases and key announcements causing high levels of volatility in the intraday exchange rates. The day kicked off early with German inflation figures meeting analysts expectations but failing to support the weak Euro. The main event of the day was the ECB interest rate decision and proceeding press conference. No surprises were provided in the decision itself with rates held record low of 0.05%. There was however a surprise in the press conference in the form a confetti launching protester jumping onto Mario Draghi’s screaming “End the ECB dictatorship”, a clear sign of the unrest and divided opinions over the ECB’s road to recovery.

Once Mario Draghi had gathered himself from this unexpected event, he proceeded to deliver a relatively upbeat report whilst remaining realistic about the Euro-zones economic short comings. Most importantly he stated that “there is clear evidence that the monetary policy measures we have put in place are effective”, referring the to the recent 1.1 trillion Euro bond buying plan. He also commented that inflation is expected to remain very low or negative in the months ahead and the deflation threat had not yet gone away. After a choppy afternoon the overall outcome was one of Euro strength, something that Euro buyers should be wary of considering GBP/EUR rates were at their highest levels for a month yesterday before dropping away late in the day.

During the night Australian unemployment figures were announced and results were much better than forecast with the headline rate dropping to 6.1% against expectations of an increase to 6.3%, and with the employment change more than doubling the consensus subsequently boosting the AUD against all currencies. With the fragile state of the Euro and Pound currently, investors may continue to look to higher yielding currencies such as the AUD which could see it become more and more expensive to buy in the coming months.

Today is absent of any Euro or UK data with only US jobless claims and housing announcements after lunch at 1:30pm.