Euro Dives on a Very Dovish Draghi

A combination of a more cautious than expected ECB, in addition to strong US retail sales data following an optimistic Fed, saw the euro experience its biggest sell off against the dollar since October. The pair rebounded off $1.1619 and is struggling to retake $1.1650.

If Draghi’s goal today was to move a step closer to policy normalisation without lifting the euro, then he did a fine job. The markers were well informed that the ECB would be discussing the winding down of the QE programme and had rallied on the prospect. 

Even the fact that a timeline was given in June, rather than July was also a potential positive for the common currency. However, investors latched on to the more cautious elements in the ECB language and the very long list of conditions put forward by an extremely dovish Draghi to exit the stimulus programme.

US Retail Saya Support Fed’s Upbeat Assessment

This comes in stark contrast to the upbeat delivery from the Fed in the previous session and served to highlight the enormous difference in stance and position between the two central banks, dampening demand for the euro. 

Furthermore, another bout of strong data from the US only served to lift the buck higher ensuring the euro received a pummelling. US retail sales grew by twice as much as expected in May at 0.8%, double the growth recorded in April as the stats matched the optimistic expectations of the Fed last night.

UK Retail Sales Smash Expectations

The pound was also suffering against the might of the dollar even though UK retail sales smashed expectations. Retail sales grew 4.4% in May versus expectations of 2.5% and growth of just 1.4% in April as shoppers returned to the high street in droves; lured out by the warmer weather after the harsh long winter and amid the excitement of the Royal wedding. 

After a week of soft UK data, and market knowledge that retail sales are notoriously volatile, the pound wasn’t able to stand the strength of the dollar as the euro dived. The pound looks to end the European session down 0.4% versus the dollar.

Currency fluctuations have been driving action on the equity indices with the ECB weakened euro boosting the DAX over 1.6%, meanwhile the weaker pound lifted the FTSE back towards resistance at 7784.

Rolls Royce Rallies

Restructuring at Rolls Royce continues to be cheered, with 4600 job cuts resulting in a 5% rally for the share price. 

Rolls Royce, renowned for resisting change, is starting to finally push through the changes that investors have been desperate to see. This attempt to slimline the firm which has so many over lapping sectors is putting fresh legs on the share price.