Euro and Sterling Tumble after Central Bank Meetings

Both euro and sterling drop sharply today following ECB and BoE rate decision.

 

ECB left interest rates unchanged at 0.50% as widely expected. President Draghi noted in the press conference that "the Governing Council expects the key ECB rates to remain at present or lower levels for an extended period of time.

 

" Also Draghi also noted that there was an "extensive discussion about a possible rate cut".

 

 In Portugal, 10 year yield dropped towards 7% level after the party of Foreign Minister Porta, who resigned earlier this week" said they would talk to the Prime Minister Coelho to solve the political crisis.

 

EUR/USD drops through 1.29 level along with the press conference. EUR/GBP jumped earlier today after BoE announcement but pared back much gain.

 

Sterling dropped sharply after BoE left rates unchanged at 0.50% and asset purchase target at GBP 375b as widely expected.

 

US market will be on holiday today. Any volatilities triggered by the central bank meetings today might be short lived as traders mind would remain on tomorrow's NFP from US.

 

The 188k ADP figure released yesterday eased some concern of a disappointing NFP number. Also encouraging was that the employment component of ISM services posted strong gain to 54.7 in June even though the headline composite index dropped to 52.2.

 

However, it should be noted again that the ISM manufacturing employment dropped into contraction region of 48.7 in the same month. So, while a solid NFP number is likely, it's not without risk.