Commodity currencies are generally soft in Asian session and are set to end the week lower in generally. Aussie and Kiwi are pressured by soft commodity prices and expectation for easing from respective central banks. Meanwhile, Canadian dollar is weighed down by weakness in oil price where WTI is soft below 45 handle. On the other hand, Sterling is firmer as markets continue rescale their expectation of August BoE easing. Dollar follows on revived expectation of rate hike this year. US equities took a breather and retreated mildly overnight, ending the record runs. DJIA closed -77.8% pts, or -0.42%, at 18517.23. S&P 500 dropped -7.85 pts, or -0.36%, to close at 2165.17. Nikkei follows and is trading down -150 pts, or -0.9% at the time of writing.
Yesterday ECB left the deposit rate unchanged at -0.4% and the main refinancing rate at 0%. The central bank also maintained the asset purchase of 80B euro per month until March 2017 or beyond, if necessary. When asked about if ECB has considered changing the terms of its asset-purchase scheme, to avoid it running out of government bonds to buy, President Mario Draghi noted that it's too early to assess the need for fresh measures and policymakers might consider the situation at the September meeting.
A key topic of the press conference is Brexit. Draghi indicated markets have coped the situation "relatively well". He added that Eurozone financial markets have "weathered the spike in volatility with encouraging resilience". Despite rigorous questions about Brexit's impact on Eurozone's outlook and ECB's monetary policy outlook, Draghi refrained from giving any hints about the next move. Banks shares were boosted by the President's call for public backstop to help banks shed their bad loans. More in ECB Left Rates Unchanged; Discussed about Backstop for NPLs.
According to a research paper coauthored by BoE MPC member Martin Weale, the central bank's asset purchase program helped boost inflation. The report stated that "QE interventions played a modest role in stabilizing inflation expectations in the United Kingdom in recent years. Our findings for other policy interventions were not conclusive." Meanwhile, "the effect of the MPC's forward guidance is not statistically significant."
On the data front, Japan PMI manufacturing rose to 49.0 in July. Eurozone PMIs will be the main feature in European session. Canada data will be the focus in US session where retail sales and CPI will be featured.