Mario what deflation threat

The euro is in striking distance of the December 2013 high of 1.3893 following the break of the six-year trend line at 1.3830 as ECB president Mario Draghi disappointed the euro bears with an extremely upbeat press conference following no change in policy from the ECB.

The markets were surprised at the positive ECB staff projections for GDP and inflation and, with the next projections now not available until June, the market is pricing out any immediate easing.

The press conference was far more hawkish than anyone had predicted as super Mario dismissed that the EU was in a similar deflationary period to that of Japan as he called the Eurozone “an island of stability”.

RBA Governor, Glen Stevens, testifying to a parliamentary subcommittee failed to turn the stronger AUD despite his acknowledgement that wage growth had slowed and unemployment will edge higher. He also added that “AUD over 0.9000 is higher than RBA’s assessment”.

The US jobs report will be the focus today after two disappointing numbers for December (+75k) and January (+113k) and a below consensus reading from this month’s ADP (+139k versus +155k consensus).

The unemployment rate is expected to remain unchanged at 6.6%; while the consensus for the headline NFP is +149k with the lower reading likely to be explained by continued bad weather.

The Ukraine crisis remains fragile despite no military confrontation. Russian forces continue to occupy the Crimea and there are lots of intercontinental phone calls between world leaders reminding each other of each sides’ point of view. This story is certainly not over yet.

EUR/USD

Supports 1.3825-1.3780-1.3705 | Resistance 1.3900-1.3935-1.4000

USD/JPY

Supports 102.40-102.10-101.65  | Resistance 103.30-103.50-104.00

GBP/USD

Supports  1.6700-1.6640-1.6610 | Resistance 1.6770-1.6820-1.6880