ECB Leaves Monetary Policy Unchanged, Euro Treading Water Before Draghi

The euro erased its overnight loss against the dollar and is trading fractionally higher at the North American open after the European Central Bank left interest rates and the size of its quantitative easing program unchanged, as expected. Earlier losses tied to bearish German inflation data — the EUR/USD traded as low as 1.0952 after the -0.2% drop in the September PPI — were effectively wiped out by the ECB announcement. But the bounce was anemic as forex players remain sidelined until after ECB President Mario Draghi’s press conference starts at 8:30am ET.

USD/JPY held above the 50% Fibonacci retracement level at 103.50 for the entire overseas session, only going so high as 103.80 ahead of Thursday’s U.S. economic data. The dollar is currently fractionally higher against the yen.

Sterling barely budged off 1.2280 overnight with some brief weakness associated with a significant miss on UK retail sales (0.0% vs +0.4% expected). Although there was the usual chatter about Brexit, this time in the UK’s favor, GBP/USD could not make a serious challenge to 1.230. It got very close when Bundesbank member Andreas Dombret said the European Union should not punish the UK in Brexit negotiations. But the reaction only took cable to 1.2284 before drifting back to 1.2275.

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