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Euro rallies - Hawkish comments from Mario Draghi

BY JOEL HOLMES

The Australian dollar saw decent moves in markets overnight to test weekly highs once again. Opening yesterday at 0.7580, we saw upside resistance levels tested at the psychological barrier of 0.76, taking leads from positive sentiment tones in mid-morning trading. AUD/USD posted daily highs during the European session, but failed to move through the key upper barrier at present of 0.7630. All gains on the Aussie were quickly erased during North American hours as confident leads from United States consumer confidence and hawkish comments from FOMC members saw the US Dollar stronger. The Australian dollar open this morning square at 0.7585.

The New Zealand Dollar dropped overnight against the Greenback, falling below the 0.7300 mark, to a24-hour low of 0.7259. The NZD/USD pair having now peaked at 0.7343. Against the Euro the Kiwi dropped to a two-week low of 0.6410 after European Central Bank president Mario Draghi talked up the prospects for Europe's economic recovery. On the local data front, there are no macroeconomic data releases scheduled for today. The Kiwi is also weaker against both the Aussie 0.9580 (1.0438) and the British Pound 0.5670 (1.7635).

The Great British Pound has found further upside when valued against its US counterpart over the past 24 hours, trading as high as 1.2860 versus the Greenback. On the data front, British CBI Realized Sales picked up in the year to June and exceeded expectations as the start of summer sees consumers on the high streets spending. 23% of retailers said that sales volumes were up in June on a year ago, while 11% said they were down, giving a balance of +12%. Meanwhile, in a report released by the Bank of England Governor Mark Carney said they were putting plans in place for the worst possible outcomes in economic and financial stability terms when it comes to Brexit, this doesn’t come as a surprise and had little impact on the currency. With little of note on the docket today attentions remain squarely focused as the heads of the central banks attend a forum of central banking in Portugal with all four heads due to give a speech. 

Major currencies were dominated by comments by a number of Central Bank officials overnight. In what started as a fairly quiet day during the Asian session, currency markets whipped into gear during the European session overnight. The US Dollar Index (DXY), a measure of the dollar against a basket of currencies fell 1%. The majority of this movement was caused by the EUR/USD cross which saw a nine-month high after surprising comments from ECB President Mario Draghi. Draghi was optimistic in his speech, looking to gradually adjust its current monetary stimulus and change its stance to a more neutral tone. The Euro continued to rally into the North American session from its intraday lows of 1.1180 to an eventual high of 1.1350. United States CB Consumer Confidence sparked the USD/JPY to rally higher after a moderate rise for the month of June. Hawkish comments from FOMC member Patrick Harper continued this rally from 111.50 to a high of 1.1245 overnight. Despite a dip inflation, Harper is keen to see continued interest rate hikes as per current schedule.