US markets were closed for President’s day yesterday leading to low liquidity in the FX market and a slightly quiet calendar. Although, as we know with the current market, it is not all about the US anymore, with much of the recent volatility being triggered by events across the pond. Data from the world’s second largest economy gave economist’s something to talk about. Chinese exports declined yesterday, although an even larger fall in imports allowed for a better than forecast reading on the trade balance data. The Yuan appreciated substantially after this news.
ECB President Mario Draghi testified in front of the European Parliament yesterday afternoon. Draghi suggested that QE was working but was relatively dovish. The Euro dropped the most since November after European Central Bank President Mario Draghi said policy makers wouldn’t hesitate to act if price stability is threatened. Draghi also stated that the ECB will remain accommodative for a long time and that market sentiment is deteriorating.
Inflation comes back into focus as the UK release their yearly figures, with the main gauge expected to increase slightly to 0.3%. As CPI is under the microscope, this will be heavily scrutinized as markets await to see if inflation can increase and close the gap on the target 2% of the BoE.