Forex today: what a ride, Trump ruins the day

Forex today was quite a ride. 

The markets were braced for the ECB Governing Council meeting on Thursday that would be followed by an interest rate announcement and a very much foreseen press conference by President Mario Draghi in Frankfurt where markets were positioned for some classic jawboning considering the velocity of the surging euro and recent volatility of FX prices.

Indeed, markets were anticipating that Draghi would need to tread carefully on policy...but what followed was a big surprise...and then Trump came out and literally spun everything on its head...

First of all, it was evident that ECB policymakers were split on what their next move in relation to FX volatility, more than how fast the euro has risen in fact. However, it was the confidence at which Draghi's hawkish rhetoric was delivered that surprised the most. In reflection, analysts at ING explained that it was hard for President Draghi to talk down the EUR when "its strength is driven by a solid domestic economy" and the soft USD while markets know that sooner or later, there will be a call for higher rates from the ECB.

Indeed, Draghi noted that the economy is the strongest it has been in more than a decade. Interestingly, without citing Mnuchin by name, Draghi clearly made reference to his remarks as noted by analysts at Brown Brothers Harriman.  "Moreover," the analysts continued, "he noted that those comments violated the international agreement, and the IMF's Lagarde seemed to echo a similar sentiment in Davos."

All in all, ECB President Draghi did not seem to try very hard arrest the US dollar's slide and euro's surge and this lead to another sell-off in the bearish saga that is the greenback; However, only until Trump came off his chair and slapped the market back into order just towards the close - and thankfully before this market wrap had gone to print.

Speaking in a CNBC interview, Trump said that he wants a 'strong dollar, reiterating his comments in Davos when he said that Mnuchin comments were taken out of context and said that the dollar was going to get “stronger and stronger”.  While the Davos comment came earlier in the day, it was only when the CNBC headlines dropped that markets really paid attention to them and the dollar reversed to make a high of 89.5800 and a big figure higher than the lows of the day, closing near to the opening price of 89.2830 to end near enough flat on the day; This sent FX into chaos, as follows:

EUR/USD headed into New York around 1.2400/20 after the ECB announcements and as markets await the presser. The euro rallied hard on a bullish EZ economy rhetoric and in the absence of concerns over the value of the euro while the anticipation of the inflation target being met sent the euro to break through the 1.2500 barriers all the way to 1.2537 the high. However, the euro then dropped sharply and back to 1.2420 on Trump's strong dollar comment and left the bulls scratching their heads, with fingers burned (and in some cases, no doubt, Bloomberg terminals through office windows). 

GBP/USD followed a similar fate, with a bid to 1.4346 before dumping back to 1.4200 on Trump within a range of 1.4346-1.4180. the cross was bid right the way through to the close of NY, closing +0.53% on the session at 0.8755 from a low of 0.8693 and meeting a high of 0.8764. 

The yen was especially bid on the back of the broad-based weakness in the DXY, (88.4380-89.5800 range). US yields were in a range of between 2.61%-2.67% -0.97% on the day closing at 2.62%. USD/JPY collapsed to 108.49 before the Trump rally and a close of 109.40 after a high of 109.70 that was faded.  

AUD/USD opened NY near 0.8080,0.8105 on ECB and the faded and closed at 0.8055 on Trump.

The Kiwi opened near 0.7360, was less of a performer after the surprise CPI miss and dropped to 0.7314 on Trump.

Gold/WTI: As for the commodity sector, Gold, after all that legwork from $1,331 recent low, topped out at 1366 before European supply into the ECB and a low of 1353 was scored. The dollar sell-off allowed another pop at the recent highs to $1,365.00 but Trump's statement sent it off a cliff to $1,342.54 the closing low. WTI fell from $66.55 to $65.04.

Key US events:

• EUR/USD trims ECB's gains on Trump's "stronger and stronger dollar
• ECB: concerned over volatility, not speed of EUR appreciation - Nomura
• GBP/USD dumps on Trump's statement that Mnuchin taken out of context
• Crypto Today: Major cryptocurrencies trade in relatively tight ranges on Thursday
• Wall Street struggles to set clear direction

Key events in Asia:

JPY Tokyo Consumer Price Index (YoY) (Jan)
JPY Tokyo CPI ex Fresh Food (YoY) (Jan)
JPY Tokyo CPI ex Food, Energy (YoY) (Dec)
JPY National CPI Ex-Fresh Food (YoY) (Dec)
JPY National Consumer Price Index (YoY) (Dec)
JPY National CPI Ex Food, Energy (YoY) (Dec)
JPY Corporate Service Price (YoY) (Nov)10.8% 0.8%