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10.03.2016 19:21

American focus: the US dollar declined significantly against most major currencies

The euro has fallen more than 150 pips against the US dollar, reacted to the news about lowering the ECB's three main interest rates and increasing the size of the bond purchase program by a third. However, the currency quickly recovered all the lost ground and reached a peak on February 15 against the backdrop of comments by ECB President Draghi and closing of short positions. Initially, the ECB reported: (1) March 16, 2016 the interest rate on the main refinancing operations will be reduced by 5 basis points to 0.00%; (2) The interest rate on the marginal lending since March 16, 2016 will be reduced by 5 basis points, to 0.25%; (3) The interest rate on deposits with the March 16, 2016 will be reduced by 10 basis points, to -0.40%; (4) since April, monthly purchases under the asset purchase program will be expanded to 80 billion euros per month with 60 billion euros a month..; (5) to the list of purchased assets include corporate bonds of investment grade non-banking corporations; (6) since June, it will launch a new series of four targeted long-term refinancing operations, each with a term of four years. Credit conditions for these operations can be as low as interest rates on deposits. All of these articulated action provoked a sharp weakening of the euro, but Draghi comments during a press conference provided significant support for the euro. CB Chairman noted that he sees no need for further reduction of the interest rate. This statement is somewhat contrary to its earlier comments that rates will remain at current or lower level for a long time. Draghi also said the ECB rejected the idea to introduce a multi-tiered deposit rate, as this could be considered a signal of further lowering of interest rates. In general, market participants interpreted the statement as a hint that the ECB has a limited number of tools to control monetary policy. Meanwhile, ABN Amro analysts explained that the President of the ECB meant that the policy of the Central Bank is not aimed at weakening the euro. Also today, the ECB lowered its growth forecast for the euro zone GDP for 2016 minutes and 2017. Evaluation of the growth of the currency bloc's economy in 2016 deteriorated from 1.7% to 1.4%, in 2017 - to 1.7% from 1.9%. Forecast GDP growth for 2018 is 1.8%. In addition, the regulator has lowered the forecast for inflation in the euro area for 2016 to 0.1% from 1%, to 2017 - to 1.3% from 1.6%. In 2018 it is expected to rise in consumer prices by 1.6% in annual terms.

The Canadian dollar depreciated significantly against the dollar, having lost to the beginning of the session more than 150 points, and almost completely offset by yesterday's growth. The pressure on the currency has had a decrease in quotations of oil after the Reuters news agency reported that a meeting of oil producers in Moscow on March 20 to discuss the freezing of production agreements can not take place because of the unwillingness of Iran to join the initiative. According to representatives of some exporters, they fear another oil prices weakening, if gathered too early and can not come to an agreement. On the representative of OPEC said last week that the oil-producing countries of the Persian Gulf would prefer to meet in the first half of April. In February, Russia, Saudi Arabia, Venezuela and Qatar have agreed to freeze production of oil at the January level, subject to adherence to the agreement of the other major exporters. Analysts warn that the world market oil supply still exceeds demand due to the boom of shale oil in the United States and after the decision OPEC to cut production. Most experts expect the oversupply of oil will remain until 2017 or 2018. Only after 2020, oil prices may start to rise and reach $ 70 a barrel, analysts say.

Market Focus

  • US nonfarm payrolls rise more than expected in July
  • Canada’s merchandise trade deficit widens in June
  • Canada unemployment rate falls to lowest level since October 2008
  • Canada Ivey PMI falls less than expected in July
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