That wild partying by the euro in the wake of the ECB’s policy statement may have been a bit too much excitement for a currency that hasn’t been trading with significant strength for some time. It was fun while it lasted, but Mr Draghi is already taking down the bunting and switching off the lights with comments that are carefully crafted to bring the euro back to weaker levels.

There’s more going on than just the euro, though, and this week we also look at the pound, the US dollar and the Swiss franc. Enjoy!

Burly euro should start looking weaker soon
The euro notched up its biggest one-day in six years on Thursday, after the ECB’s monetary policy announcements failed to live up to all the hype. The ECB cut the deposit rate by 10 basis points (to -0.3%), and announced it will extend the €60 trillion-a-month asset purchase programme by at least six months to the end of March 2017. What it won’t be doing – and what the market expected it to do – is increasing the size of monthly monetary stimulus.

This failure to satisfy left the euro to rally strongly as traders piled out of euro shorts. The euro jumped 4% at one stage against the US dollar, before ending the week up 3%. The currency enjoyed similarly large gains versus several other majors, including the pound and the yen. Don’t get used to this brawny version of the euro, however. Mr Draghi has already used a speech on Friday to start talking it down again.

UK rate rises: Manufacturing build-up not forthcoming
Sterling fell against its major trading pairs last week, as a mixed set of economic indicators failed to make the case for the Bank of England raising rates soon. Services growth accelerated, but the manufacturing and construction sectors slowed.

The pound was weaker against the euro, returning to its lowest levels since the end of October as the European Central Bank disappointed markets and strengthened the euro. Sterling was also lower against the dollar, although pared losses after touching on its weakest level since April. The pound continued its downward trend against the Australian and New Zealand dollars to reach six-month lows.

All eyes today (7 December) are on Bank of England boss Mark Carney as he prepares to testify before the European Parliament Committee on Economic and Monetary Affairs. This could be a clue as to how the meeting of the Bank of England’s Monetary Policy Committee on Thursday is likely to go. With no change to interest rates expected, investors are looking for any shift in tone from members – those hoping for rate rises will not be cheered by today’s depressing news from the UK manufacturing industry.

US rate rises: Only nine days away. Maybe.
The US dollar was steady near eight-month highs against its major peers, after Friday’s solid jobs numbers lent support for an imminent rise in interest rates. The Department of Labor reported that non-farm payrolls in November increased by 211,000, ahead of estimates and leaving the Federal Reserve in a stronger position to raise the benchmark federal funds rate when it meets next week.

This helped the US dollar to regain ground after shedding around 3% against the euro following Thursday’s European Central Bank meeting. The Greenback is holding firm: It’s near to eight-month highs against the pound, and is close to its strongest against the yen since at least 2007. However, it did drop 3% against the Swiss franc, erasing all of November’s gains.

Investors will be paying close attention to what could be the last significant set of data for the Federal Reserve before it sits down to decide its course of action. Friday sees the release of retail sales and inflation figures, which could be a strong influence on the Fed’s thinking. The University of Michigan consumer sentiment report is also due out on Friday.

“Significantly overvalued” Swiss franc heading for a fall?

Last week, the Swiss franc rose strongly against the US dollar and largely withstood the euro’s appreciation as the euro-franc pair remained locked in a narrow range. Traders are now looking ahead to Thursday’s monetary policy announcement from the Swiss National Bank (SNB), which may now be under pressure to cut interest rates after the ECB’s easing measures.

Lower interest rates from the ECB tend to drive up the Swiss franc, which the SNB says is “significantly overvalued” already.

Information courtesy of Currencies Direct
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