The European Central Bank surprised markets by taking a decidedly dovish stance in the comments which following the rate decision announcement. Mario Draghi, the ECB president, said that the ECB’s governing council was unanimously committed to taking any and all measures necessary in order to manage risks as a result of prolonged deflation. FX traders saw that as a solid hint that the ECB might soon make a monetary policy change even in spite of yesterday’s decision to maintain the status quo regarding interest rates. Analysts hailed the decision saying that the ECB had been dragging its proverbial feet in response to the deflationary trend and told clients to anticipate some non-conventional measures before the year’s end.
As reported at 11:40 a.m. (JST) in Tokyo, the EUR/USD traded at a low of $1.3698, falling 0.3% before recovering to $1.3718 while the EUR/JPY pair moved off a 4-week high to trade at 142.59 Yen. As a result of the Euro’s broad sell off the U.S. Dollar Index got a boost to trade at 80.498 .DXY, a price last seen in late February. The USD/JPY also closed above the 104.00 Yen level for the first time in nearly 10 weeks before falling back to 103.93 Yen.
NFP Surprise Expected
Investors expect that the greenback could find significant support if today’s release of key labor data offers a positive surprise. A recent poll of economists puts non-farms payrolls at 200,000 new private sector jobs for March, an increase of 25,000 jobs from February’s data. Analysts believe that a number close to consensus would provide investors with some confidence that the U.S. economy is recovering after a harsh winter.