The Australian dollar weakened in overnight trade, falling in sympathy with the euro following the ECB’s December monetary policy meeting.
ECB president Mario Draghi announced that the bank would extend its asset purchase program beyond March 2017, albeit at a slower pace.
The bank will purchase bonds totalling €60 billion per month from April to December next year, down from the current pace of €80 billion per month. It also expanded the list of eligible securities it could purchase, including assets yielding below the bank’s deposit rate of -0.4%.
Despite lower monthly bond purchases, this is essentially additional monetary policy easing from the ECB, further diverging from monetary policy settings in the United States.
Draghi also said that there was “very, very broad consensus” that purchases would continue beyond 2017 if necessary to get inflation back to the ECB’s target of 2%.
The euro weakened as a result, helping to spur strong gains in the US dollar index. This, in turn, led to weakness in the Aussie.
Here’s the scoreboard as at 7.50am AEDT:
- AUD/USD 0.7458 , -0.0021 , -0.28%
- AUD/JPY 84.98 , -0.09 , -0.11%
- AUD/CNH 5.1512 , -0.0052 , -0.10%
- AUD/EUR 0.7025 , 0.0071 , 1.02%
- AUD/GBP 0.5930 , 0.0007 , 0.12%
- AUD/NZD 1.0383 , -0.0051 , -0.49%
Whether that trend continues on Friday will likely be determined by investment sentiment, rather than the economic data calendar.
In Australia, the ABS will release housing finance figures for October at 11.30am AEDT, with most interest likely to fall on the split between owner-occupier, investor and first home buyer numbers.
Regionally, Chinese will release producer and consumer price inflation figures for November at 12.30pm AEDT.
Both PPI and CPI are tipped to grow by 2.2% from a year earlier, up from 1.2% and 2.1% respectively in October.
Later in the session, markets will receive trade numbers from Germany and the UK while the preliminary University of Michigan consumer confidence survey will be released in the US.
None appear likely to generate a significant reaction in currency markets.