The forex market was mostly driven by central bank speeches in today’s European session. The euro was boosted on the optimistic remarks by the European Central Bank President Mario Draghi. The pound advanced following the release of the Financial Stability Report and the speech by Bank of England Governor Mark Carney. The dollar firmed up on the strong consumer confidence data, as markets await Janet Yellen’s talk later today.
The ECB President’s bullish stance on the recovery in the Eurozone and the prospects of rising inflation have helped the euro. Building on the strong momentum post the talk, euro/dollar broke above the 1.1300 handle, reaching a seven-and-a-half-month high, in late European trading session. Meanwhile, euro/pound climbed to an intra-day high of 0.8847. These positive comments may also add to speculation that the ECB is soon to start discussing its plan to normalize policy as it exits its monetary stimulus program.
Sterling got a lift against the greenback following the release of the Financial Stability Report. The BoE tightened its controls on bank credit by increasing its counter-cyclical capital buffer from 0% to 0.5% and it expects to further raise the buffer to 1% in November. While markets assume that the tighter fiscal policy may bring tighter monetary policy as well, the Governor said "Monetary policy is the last line of defence to address financial stability issues. In that regard, we don’t need monetary policy to do our job." Pound/dollar rose to 1.2766, a one-week high as the European trading session was coming to a close.
The dollar index, a broader gauge of the US currency’s strength, was last down 0.66% on the day. The greenback initially weakened against the yen in late European session amid the softer-than-expected home-prices data, though it quickly recovered all the losses after the release of the strong consumer confidence data. US consumer confidence in June rose to 118.9, above the expected 116.0 and May’s 117.9. This pushed dollar/yen above the 112.00 handle and to a one-month high of 112.16.
Looking at commodities, gold managed to recover some of yesterday’s losses, following a large sell order that hit the market. The commodity last traded at $1248.13 an ounce. This compares to yesterday’s one-month low of $1235.84 an ounce.
WTI oil futures (August 2017 contract) continued to gain for the fourth consecutive day, last trading at $44.33 a barrel in late European hours.
Looking ahead, Fed Chair Janet Yellen is scheduled to give a speech at 17:00 GMT.
