Draghi is his usual self this morning bringing the Euro down below the 1.07 levels with his speech. While he didn’t say anything meaningfully new he did reiterate that ECB will do whatever it takes to get inflation to raise as quickly as possible. This is generally taken to mean that there will be further easing announced in December. If this does happen and the US raises interest rates at the same time there is talk of parity between the two currencies as the gap widens between the yields on sovereign debt.
Across the globe China is cracking down on illegal foreign exchange transactions by closing what they believe to be the country’s largest “underground bank”. It is estimated that about $64 Billion worth of transactions were funneled through this organization and 370 people have been arrested or charged in connection with the “bank”. The Chinese Yuan continues to struggle after past year has seen the government devalue the currency several times to combat economic struggles.
In the commodities market China also announced that refiners will cut production of metals such as Zinc which will be reduced by 500,000 metric tons next year. This has provided a rally in the commodities market with Zinc prices in particular increasing by almost 6%. This has proved a boost currencies such as the Australian dollar whose economy is heavily dependent on the trade of commodities, especially with China.
As the major economies in the world struggle with policy decisions and begin to diverge, emerging markets are set to turn a corner. Goldman Sachs sees the economies of Russia, India and Poland as potential bright spots of growth next year.
EURUSD: Euro down this morning on Draghi’s speech.
GBPUSD: The pound is down this morning as well as data is ignored in favor of greater Euro-area concerns.
AUDUSD: Aussie dollar up this morning as the commodities rally due to cut in production by China.
USDCAD: Canadian dollar weakens against the USD despite better than expected Core CPI numbers.