Stocks extend recovery; ECB in focus

Summary:

• FTSE aiming for 4th daily gain in a row

• EURGBP sensitive to ECB rate decision

• USDMXN volatile with tariffs talk driving the market

There’s been more upside seen in equities this morning with the FTSE working on a 4th consecutive daily gain as stock markets look to recover from last month’s declines. The pound is little changed at present with the currency showing little reaction to the latest economic data from the UK and it appears that the other side of the cross is the main driving force for sterling pairs at present.  

ECB to announce latest policy decision

The main economic event of the day comes from Vilnius as the European Central Bank (ECB) are set to reveal the outcome of their latest policy decision in the Lithuanian capital. No major change in policy is expected although there is some speculation that Governor Draghi will reveal favourable terms on TLTRO-3 in what could be an attempt to deliver a more dovish message. The Euro rose to a 7-week high against the US dollar during Wednesday’s session after a shockingly bad US jobs data before a recovery in the buck pushed the pair back below the $1.13 handle. The single currency remains not far from a 5-month high against the pound and while we don’t expect any fireworks from the ECB, a more dovish message could weigh on the Euro and see the EURGBP pair retrace some of the recent gains.   

The EURGBP has pulled back in the past couple of session after a strong move higher saw the pair hit levels not seen since January. 0.8900 potential resistance. Source: xStation   

Mexican Peso volatile to trade headlines  

There’s been some pretty wild swings in the Mexican Peso of late, as rumour and counter-rumour surrounding US tariffs are causing traders to scramble and and this has caused a marked pick-up in volatility. Comments yesterday evening from White House trade representative Peter Navarro that the tariffs may not in fact be implemented caused the Peso to attempt a recovery before two rating agencies slashed their credit ratings on Mexico in a move that saw all the gains erased. The threat of US tax levies comes in an attempt to apply more pressure on their southern neighbour to control the flow of migrants at the border. The USD/MXN pair was among the most volatile during the 2016 US election campaign and Trump’s latest move to politicise economic tariffs have threatened to cause another run on the Peso.