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Draghi’s ‘hawkish’ comments don’t help Euro, USD quiet before FOMC meeting

Published on: 10/1/18 10:13 AM

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Category: Currency, Forex, Latest News, Market, Trade, Trading, US News, World News

On Tuesday, European Central Bank president Mario Draghi made comments that many people felt were hawkish in nature.


However, those comments weren’t enough to help push the Euro on Tuesday. The US dollar also seemed to stall a bit as many investors await the latest Federal Reserve meeting announcements. Other currencies were also relatively quiet ahead of any big news.

Draghi’s comments


A Reuters report noted that Draghi called inflation “relatively vigorous” in those comments. He also gave his vote of approval in terms of wage growth or euro zone inflation. That led to the euro hitting a 3-/12 month high this past Monday but the currency struggled on Tuesday. Most analysts believed Draghi’s comments were “hawkish,” but not everyone shared that sentiment. Peter Praet, a chief economist for ECB, suggested Draghi’s comments didn’t give investors anything new. The Euro initially rebounded a bit on Tuesday before heading down about 0.1 percent to $1.1742.

In terms of other currency beyond the euro and USD, other forex markets were much quieter. Right now, there are still concerns over the trade conflict involving the United States and China. The dollar index was at 94.165 as of this report. This particular index is a measuring stick for the USD versus six major currencies.

The Australian dollar was at $0.7251 and considered flat after an earlier recovery. Meanwhile, the Swiss franc dropped about 0.2 percent down to 1.1356 francs against the euro. China’s offshore yuan was up about 0.1 percent to 6.8626 per US dollar, while the Japanese yen also went up 0.1 percent to 112.915 per USD. There’s also the upcoming Federal Reserve meeting where most investors believe a third interest rate hike is due to arrive. That meeting takes place across Tuesday and Wednesday within the United States. This expected rate hike is already been priced into the market. However, any particular comments that Fed. Reserve Chairman Jerome Powell makes after the meeting could have an impact on the markets.

Brexit backlash


State Street Bank’s Tokyo Branch Manager Bart Wakabayashi believes “the dollar remains the absolute go-to currency” when it comes to any risk or stability fears involving “geopolitical situations.” Wakabayashi believes any negative news from the Brexit or positive statement from the Federal Reserve meeting could drive the US Dollar higher. Frankfurt Commerzbank strategist Thu Lan Nguyen believes the market isn’t reacting to a trade war because there hasn’t been any economic impact just yet. He also suggested, “the FOMC is going to be a non-event.” Still, many forex traders will have their eyes and ears open for the latest announcements coming out of this crucial meeting.