• Draghi sticks to his guns
  • Trump sacks FBI Director
  • A shadow over the Fed
  • Oil takes CAD higher

Good morning,

Mario Draghi appeared in Dutch Parliament today, but his positive outlook on improvements in the economy were not enough to inflate the euro. With an improved risk outlook, the ECB president confirmed that the recovery had evolved from fragile and uneven to a broader trend upwards – but while monetary policy has stabilized inflation expectations, “it is too early to declare success.” Draghi remains unconvinced that the underlying dynamics that drive core inflation are moving up, thus “maintaining the current very substantial degree of monetary accommodation is still needed for underlying inflation pressures to build up and support headline inflation in the medium term.” Hawkish investors looking for hints that the ECB will be scaling back their aggressive stimulus program were disappointed, and the euro took a leg lower against the greenback.

The dollar slipped overnight when the White House announced that President Trump had fired FBI Director James Comey. The letter to Comey cited recommendations from both the Attorney General and the Deputy Attorney General as his reasons for dismissing the Director, but the timing has sparked questions about Trump’s motivations. Comey was in the midst of investigating alleged ties between Russia and the Trump campaign, and while in the letter Trump thanked Comey for telling him “on three separate occasions” that he was not under investigation personally, Senate Minority Leader Chuck Schumer has called for a special prosecutor to take over the investigation.

Federal Reserve Bank of Dallas President Robert Kaplan’s speech yesterday pushed the dollar lower and could create concerns about the pace of Fed rate rises this year. Kaplan, usually a fairly neutral member of the FOMC, mentioned that the economy could “unfold in a weaker way,” which would prompt the Fed to scale back their current projections for three rate hikes this year. Should Kaplan’s comments start echoing amongst other Fed members, we may see a further slide in the dollar as investors scale back their bets of a rate hike in June.

Oil jumped 1% this morning to recoup most of yesterday’s losses. WTI crude oil climbed above $47 a barrel after data from the American Petroleum Institute showed US oil inventories fell by 5.8 million barrels, far beyond the 1.8 million drop analysts expected. The Canadian dollar had been reluctant to follow oil higher, but has joined other oil currencies like NOK and RUB at session highs after further data from the Department of Energy that shows an inventory draw that was more than double expectations.

EURUSD: Euro lower after Mario Draghi kept his commitment to the current monetary policy program.

GBPUSD: Sterling erased overnight gains against the greenback and the pair is trading flat into the Bank of England policy meeting tomorrow.

AUDUSD: Aussie dollar sustaining a move up against the USD amid political jitters stateside.

USDCAD: Canadian dollar benefitting from lower than expected US oil inventories coupled with larger draws from existing stockpiles at the Department of Energy.

USDJPY: The yen is broadly higher after news that North’s U.K. ambassador said they will proceed with a sixth nuclear test, but the USD took back ground and is slightly higher against the yen.