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Outcome of ECB Rate Meeting

March 6, 2014 in Forex Fundamentals and News

At its meeting today in Frankfurt, the Governing Council of the ECB maintained the status quo on interest rates, on the basis of better economic data out of the euro area.

Better-than-expected recent data on GDP, rising levels of business confidence and expansions in manufacturing and services in an environment of persistently low inflation probably nudged the ECB towards their decision to keep interest rate policy intact and unchanged. The ECB said:

“At today’s meeting the Governing Council of the ECB decided that the interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility will remain unchanged at 0.25%, 0.75% and 0.00% respectively.

The President of the ECB will comment on the considerations underlying these decisions at a press conference starting at 2.30 p.m. CET today.”

The ECB’s decision was widely expected by analysts across the globe.

However, according to the IMF, the ECB is hastening too slowly, and advocated yesterday that it should take stronger measures to breathe life into the Eurozone economy by cutting interest rates and adopt QE-style strategies.

In a blog, Reza Moghadam, the head of the IMF’s European Department said:

“The ECB must be sure that policies are equal to the tasks of reversing the downward drift in inflation and forestalling the risk of a slide into deflation. It should thus consider further cuts in the policy rate and, more importantly, look for ways to substantially increase its balance sheet, be it through targeted LTROs or quantitative easing (public and private asset purchases).”

The ECB in its wisdom has held its fire.

We look forward to Draghi’s press conference later today.

Meanwhile, the EURUSD exhibited some volatility after the decision but was mostly unchanged, thereafter:


Euro Hits Two-Week Low Following Draghi Comments

February 8, 2013 in Forex Fundamentals and News

The single currency saw a sharp decline against the dollar on Thursday, after ECB President Mario Draghi commented on the effects the euro’s recent gains will have on the economy.

Mr Draghi stated that its increase may affect the region’s recovery in slowing inflation and growth as well as demand for Eurozone assets.

The other key issue was the ECB interest rate which was left unchanged at 0.75%, as widely expected.

During the news conference, the ECB chief said the latest gains for the euro are a sign of confidence. However, since the exchange rate is essential for growth and price stability, a close monitoring will be done in order to see “whether the appreciation is sustained and will alter our risk assessment.

Following the news, the euro, which gained 12% against the dollar since the summer, experienced its biggest five-day fall against the greenback in seven months, dropping to 1.3381 during yesterday’s trading. In the early hours on Friday, the single currency hovered around its low levels from yesterday and was trading at 1.3409 at the time of writing.

Mario Draghi said that business activity was returning and the Euro area “should gradually recover’’ later in 2013; however the economic situation still ‘’remains fragile’’.

A strong euro could hurt European exports’ competitiveness on the global markets and decrease inflation in the Eurozone because of cheapening imports.

According to analysts, however, the euro could be backed by investors’ sentiment that the ECB favors a much weaker monetary easing compared to that of the Fed and the BoJ.

EUR/USD chart


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Commodity Currencies Losing Direction Amidst Uncertain Economic Outlook And Psychological Pressure

January 23, 2013 in Forex Fundamentals and News

AUDJPY - direction less movesCommodity currencies has been seeing a directionless volatile moves against the U.S. dollar. AUD/USD has tried twice to touch the psychological 1.0600 level since yesterday but failed miserably. First time it had gone as high as 1.0578 and then after a drop to 1.0549 it again recovered but failed strongly at 1.0574 and fell sharply to 1.0527 before entering a sideways mode. USD/CAD has made 3 attempts since Friday to test 0.9950 level but failed each time. The first attempt took it to 0.9932 followed by 0.9946 and the last one failed at 0.9945. After recovering from 0.9815, the pair is moving into a narrow range between 0.9900 and 0.9950.

Mixed economic data

Today’s consumer price index data for quarter 4 of 2012 from Australia came out weaker than the market expectations. The quarter on quarter change in the CPI in Q4 was 0.2% against the consensus of economist for a change of 0.4% and the previous change of 1.4%. The year on year change of 2.2% was better than that of quarter 3’s 2% but was less than the expected 2.4%.

Today’s China Conference Board’s leading index data which aggregates six economic indicators to measure economic activity in China indicated a slowdown from previous 1.1 to 0.4 in December. China being the largest export market for Australia affects the sentiments for Australian dollar strongly.

On the other hand yesterday’s data showed an unexpected drop in the existing home sales in the U.S. also. The month on month change in the existing home sales in December 2012 dropped to -0.1% from the previous  4.8% while the market consensus was for a drop to 1.2%.

Global economic outlook concerns

U.S. debt crisis

US debt to GDP ratio

Though Republicans have shown some flexibility for their demand to have the budget spending cuts to increase government’s borrowing levels but this only gives a temporary relief.  On Wednesday in the U.S. the house vote is scheduled for Republican party sponsored legislation to allow Obama administration to extend the borrowing limits to cover the cost obligations for next 3 months. The estimates are that the U.S. Treasury will not have sufficient funds to pay all its bills sometime between Feb. 15 and March 1 week. Delays in firm steps to tackle the issue with longer-term goals is a threat not only to the U.S. economy but the global economy.

Mixed sentiments in Euro zone

Even though the progress in decisive steps in policy decision and Greece bailout have brought in some optimism but one the other hand the crisis is far from over. The high unemployment levels in Europe and ECB’s expectation that the euro-zone economy will shrink 0.3% in 2013 do not create any overall optimistic picture about the economy. The efficient channeling of rescue funds in the time to come and mutual agreements about the same remains a challenge.” Making the ECB a single European bank supervisor this year is a major organizational challenge”,  European Central Bank President Mario Draghi said late yesterday in Frankfurt.

Commodity currencies

Any uncertainties about global outlook keep the uncertainties on for the global currencies. Some positive recent outlook about China’s economic growth in 2013 have been favoring the strength of Australian dollar but on the other hand the overall global economic uncertainties are keeping the Aussie in check. Same is the case with Canadian dollar which has weaken against the US. dollar recently but is now hesitating ahead of the psychological level of 1.000 or parity.

EUR/USD – Mid-Term Outlook

September 14, 2012 in Forex Fundamentals and News

Mid-Term Outlook of EUR/USD

Federal Reserve announced buying of Mortgage Securities in yesterday’s policy meeting. This 3rd round of bonds buying is another effort for the quantitative easing to help the job market and hence the economy of U.S.

Though yesterday’s report of “Continuing jobless claims” was better than expected but the Initial Jobless Claims” increased and showed the figure as 380,000 against the previous month’s 367,000.

The monthly budget statement also was bearish with -191 B U.S. Dollars against the last month’s USD -69.6B.

Let’s have a look on some of the fundamental and technical factors to see what is to be expected from EUR/USD in the coming days:

Fundamental/Market Sentiments:

1) ECB’s plans of unlimited bond buying to help debt crisis and German court’s ruling for conditional German stand for the same has boosted up the confidence in Euro at least temporarily. There are still some uncertainties about Greece not reaching agreement for budget/spending cuts to be eligible to receive the rescue funds.

2) The 3rd round of Quantitative Easing measures announced by Fed should keep some bearish pressure on USD. There is generally an inverse relationship in Bonds and interest rates and hence the currency itself.

Technical and Price Action:

1) First time after May 8th the price touched the 1.3000 level. Though it is hesitating to break it decisively after touching 1.3001 but the momentum is expected to take it further up, at least in psychological terms. Not only that but the break of the mid-term channel resistance indicate that further upward move should take place. Please check the weekly EUR/USD chart as follows:

EURUSD break of trend line resistance

2) Technical Indicators:

Weekly Ichimoku Cloud:

Weekly Ichimoku has not yet given a bullish crossover signal but such a strong break of Kijun line resistance after long suggests that the currency pair should try to test the next resistance of the lower edge of the cloud i.e. move towards 1.3140 next.

EUR/USD weekly chart - Ichimoku cloud

Weekly MACD:

Weekly MACD has crossed over the signal line to give a bullish signal.

EUR/USD MACD - Weekly chart

Overall, considering all factors we would expect EUR/USD to have further upward moves towards 1.3140 first and then may be more. While saying this we also expect some sideways moves near/below 1.3000 initially, considering the psychological aspects of this level.

  • hymarkets

EUR/USD Outlook – September 13, 2012

September 13, 2012 in Forex Analysis

EUR/USD has been moving in very narrow ranges even though the movement is showing signs of bullishness.

The factors which are keeping the move in check are:

1) Psychological resistance of approaching 1.3000 ranges:

Since May 8th, 2012 the pair has been trading below this and even had dropped as low as 1.2042.

2) Questions about the rescue plans in Euro zone:

On one hand the German court ruling was supportive for the rescue plan after the ECB announcement of the readiness for unlimited bond purchase but on other hand the the lack of agreement of spending cuts in Greece are keeping the uncertainties high. This agreement is required to be able to receive the aid.

3) Policy meeting of Federal Reserve:

Speculations that Federal Reserve will announce plan for bond buying in today’s policy meeting. The meeting is scheduled at 18:15 GMT today.

The key support at first 1.2900 and then 1.2860 may prove to be critical and on the other side the resistance of the recent 1.2936 needs to be broken to expect a test of 1.3000. A test of this psychological level should ultimately take place after such a strong upward move but still a close watch for the supports and careful approach is required.

  • hymarkets

Forex Markets Looking for Direction – Where Do We Sell the Pound?

August 15, 2012 in Forex Analysis

The euro got an early-morning boost when the German GDP Season Adjusted (Q/Q) came in a tick better than expected at a positive 0.3%.  Most of the other German numbers were negative but the market did not want to focus on the negative.

Looking at all of Europe, Industrial Production fell 0.6% and the economy contracted by 0.2%.  In Greece, where the troika is administering the economic blood-letting, the most recent GDP showed – extended to an annualized number – there will be a negative 6.2%. Since the austerity programs have been introduced to the Greeks, in return for bail-out money, the Greek economy has contracted by over 20%.  Contrary to the IMF projections, the austerity programs results in negative numbers that are consistently worse than forecast.

Other European GDP numbers lagged the positive number from Germany.  The French GDP for the 2nd quarter would result in an unchanged yearly number.  The Italian quarterly number fell to a negative .07% and Spain had a negative 0.4%.  Both Italy and Spain are now in a recession.

Yields on Italian and Spanish sovereign debt has been rising as the economies slow.  Last Tuesday week, Italian 2-year notes were yielding 3.51%, and the Spanish 2-year, 4.32%.  In Greece yesterday, they sold €4.06B of 90 day bills which yielded 4.43%.  Contrast this to .27% in the US, .13% in the UK and a negative .04% in Germany for 2-year notes.

Aware the risk is increasing with the Italian and Spanish debt, LCH. Clearnet, the clearinghouse for European debt, Monday raised the margins, and the commissions on existing Italian and Spanish debt; this will make it harder for Italy and Spain to sell their paper.

There were several other meaningful reports yesterday.  The German ZEW Survey of Economic Sentiment fell from a negative 19.3 to a negative 25.5.  Clearly, there are some Germans bearish on the economy.

In the US we got the Retail Sales number, a positive 0.8%.  Coming after two months of negative 0.4% reports, there initially, was some excitement.  After examining the numbers, some of the experts think seasonal adjustments by the Census Bureau resulted in the surprise number.

In Britain, the (Y/Y) CPI was up to 2.6%, higher than the last 2.4% increase and above the Bank of England’s target of 2.0%.  It is doubtful this number will influence the BoE who claims the CPI will come down later in the year.  Looking at the GBPUSD chart, the pound has been gaining against the USD for eight days.

Our COT Report shows the Specs to be modest shorts in the pound.  We note the MACD has turned higher, a friendly sign.  Should the market clear 1.5760 there should be some short covering but fundamentally we do not see the attraction with a long pound position.  We will be watching for a spot to short the pound for a move back to the 1.55 area.

GBPUSD Daily 14 August 2012, Cash Back Forex Brokers Online

Any opinions, news, research, analyses, prices, or other information contained in this post are provided as general market commentary, and do not constitute investment advice from

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