Draghi provides markets with much needed ‘pick-me-up’

Draghi provides markets with much needed ‘pick-me-up’

By Tim Waterer (Senior Trader, CMC Markets)
27 July 2012

Financial markets received a much needed ‘pick-me-up’ courtesy of Mario Draghi’s staunch defence of the Euro. The implication of bond buying from the ECB released the pressure valve on Spanish yields which caused traders to rediscover the mood for buying risk assets across the board.

The Euro was launched at a near 90 degree angle against the US Dollar after the ECB President sounded resolute in his remarks. Just how long the Euro rebound can be sustained will largely depend on how long comforting words will suffice before actual deeds are needed from the ECB by means of bond purchasing.

With traders being reassured of the ECB’s commitment, growth sensitive assets such as oil found some added momentum in light of the lower US Dollar as safe haven buying took a back seat to risk assets.

The Australian Dollar tracked a path similar to that of global equity markets as traders took comfort from events in Europe. The AUDUSD rate is again hovering around the 1.04 level, and if the better sentiment can find some legs into next week then 1.0520 starts looking like a short term target.

Equity markets found renewed buying impetus on hopes that the ECB are ready to pull out all the stops to solve the regions roubles. Australian shares were in a buoyant mode to end the week, with the sectors most susceptible to any global growth worries performing best today with investors clearly pleased about the ECB now showing a sense of urgency to fix the crisis. RIO posted impressive gains while the gold stocks also made the most of the better sentiment and the resulting weaker US Dollar.

US GDP data tonight will be key in whether the momentum from today can carry across to next week or not. A stronger result than the forecast would be cheered, and interestingly anything closer to 1% growth could also be cheered if traders believe this would spur the FOMC into launching QE3.

www.cmcmarkets.com

ENDS

© Scoop Media