Kuwait – Mubasher: Last week revolved around the highly anticipated European Central Bank’s meeting, where measures taken by the ECB did not meet expectations fuelling volatility in global financial markets, said National Bank of Kuwait.
In a conference after the meeting ECB President Mario Draghi announced a 6-month extension to the bank’s current 60 billion euros a month quantitative easing program, and expanded the assets purchased to include local and regional bonds.
The fresh measures indicate further widening in monetary policy divergence with the ECB adding stimulus as the US Federal Reserve prepares to start its process of normalization. Meanwhile, the disappointment from the ECB’s announcement was clearly felt in the financial markets, sending the Euro higher and equities and government bonds lower, according to NBK.
“On the foreign exchange side, the US dollar index opened the week on a strong footing despite disappointing data from the manufacturing sector. The index soared to a high of 100.510 amid a positive ADP employment report. However, the index managed to lose most of its gains as the ECB measures fell short of market expectations triggering a broad based US dollar sell-off. The greenback dropped to a low of 97.591 on Thursday. On Friday, the Dollar managed to rise amid the release of the positive US nonfarm payrolls number and close the week at 98.246,” said NBK.
The euro traded in a volatile manner last week, as it opened the week at 1.0593 and traded in a very tight range ahead of the ECB announcement
The Japanese also gained against the greenback last week. The USDJPY opened the week at 122.80. The pair managed to reach a high of 123.67 mid-week. However, the Dollar failed to hold on to these gains and dropped to a low of 122.30 against the Yen. Finally the pair closed the week at 123.11.
On the commodities side, light crude still managed to close the week lower as a supply glut overweighed the weakness in US Dollar. West Texas light crude opened the week at 41.71 and dropped to a low of 39.84. Oil managed to regain some of its losses and closed the week at 39.97. Gold on the other hand, managed to post its first weekly gain since October after disappointment over the European Central Bank’s stimulus decision which fuelled a retreat in global equities. Spot gold opened the week at 1057.45 and managed to close the week at 1086.34.
