Euro tumbles as Lagarde launches strategic review
The euro declined sharply in the American session as the market listened to Christine Lagarde. Lagarde had a press conference shortly after the ECB delivered its first rates decision of the year. In her statement, Lagarde said that the bank would examine whether it should alter its €200 billion bond holdings to consider climate change. She also launched a one-year review that will address some of the most divisive issues in central banking. For example, the bank said that it would reconsider the inflation target that defines its main price stability mandate. This review comes at a time when many are questioning the effectiveness of central banking tools. For example, extremely low interest rates and unemployment rates in Switzerland, Japan, and Europe have failed to stimulate inflation.
The New Zealand dollar rose slightly after the country released inflation data for the fourth quarter. Data from Statistics New Zealand showed that consumer prices rose by 0.5%. The primary contributor to this was higher domestic and international airfares, rent and energy prices. The annual inflation was 1.9%, which was higher than the previous 1.5%. The housing market saw an increase in rental prices. Rent rose by 0.8% in the third quarter and by 3.1% for the year. This was the biggest increase since September 2008. Meanwhile, activity in the manufacturing sector cooled-off. Manufacturing PMI declined from 49.2 to 49.1.
The focus today will be in the preliminary PMI data that will be released by Markit. The flash manufacturing data in the UK is expected to come in at 47.6. This will be lower than the previous 47.5. In Germany, the flash manufacturing PMI is expected to improve slightly from 43.7 to 44.5. In France, the number is expected to improve from 50.4 to 50.6. In the European Union, the PMI is expected to have increased from 46.3 to 46.8. These numbers show that there is an improvement in the manufacturing activity in the European Union.
The EUR/USD pair dropped below the symmetrical triangle that had formed yesterday. The pair dropped from a high of 1.1110 to a low of 1.1.1035. This was the lowest level since November last year. The price is below the 14-day and 28-day exponential moving averages. The dots of the Parabolic SAR indicator are above the price. The pair may likely continue moving in the current downward trend.
The NZD/USD pair rose slightly after the better-than-expected CPI data from New Zealand. The pair rose from a low of 0.0.6580 to an intraday high of 0.6620. This was the highest level since January 20. As shown on the hourly chart below, the pair had established a triple bottom pattern, which is a sign that it had bottomed. The price is above the 14-day and 28-day exponential moving averages. It is also between the 50% and 38.2% Fibonacci Retracement level. The pair may continue rising today.
The XBR/USD pair declined to a low of 60.57 as the market continued to worry about the spreading virus in China. They expect the virus to affect the demand of oil. The pair is trading at the lowest level since December 4 last year. On the four-hour chart, the price is below all the short and medium-term moving averages. The RSI is below the oversold level of 30 while the momentum indicator has been falling. The pair will likely find some support at the psychologically-important level of 60.00.