EURO LITTLE CHANGED AFTER ECB LEAVES RATES AND FORECAST UNCHANGED
The ECB concluded their monthly meeting and left interest rates unchanged. They left the base lending rate at 0.25% and the deposit facility rate at negative 0.4%. In the accompanying statement, the officials said that they would leave rates unchanged for the foreseeable future, including after the end of the net asset purchases. These purchases are expected to end in September. Their statement came at a time when data from the EU is conflicting. On Monday, data from HIS Markit showed that purchasing managers were optimistic about the economy. On Tuesday, data from IFO showed increasing pessimism among managers in Germany, Italy and France. Yesterday, a survey by the ECB showed that banks were starting to lend and last week, data showed that inflation was not rising as expected.
In the US, data from the Census Bureau showed that the core durable goods orders were unchanged in March. This data measures the change in the total value of new orders for long lasting manufactured goods, excluding transportation items. On the other hand, durable goods orders grew by 2.6% compared to the estimated 1.6%. At the same time, the initial jobless claims fell to 209K compared to the estimated 230K.
The earning season continued with Facebook reporting quarterly revenues of more than $11.8 billion and net earnings of $4.99 billion. This was way higher than what analysts were expecting. In Europe, Germany’s biggest bank, Deutsche reported poor earnings. It reported revenues of EUR 6.98 billion. This was down 5% from a year earlier and lower than the estimated EUR 7.27 billion. Its sales and trading revenue of EUR 2.45 billion was down by 17%. The bank announced plans to scrap its global ambitions where it aimed to compete with bigger companies like Goldman Sachs. The DAX index was up by about 30 basis points.
On Tuesday, GER30 fell sharply from a high of EUR 12,560 to a low of EUR 12,310. Today, the index rose by about 30 basis points despite the disappointing numbers from Deutsche. It reached a high of EUR 12,475, which is also the 50% Fibonacci Retracement level. The rise today came as the US 10-year treasuries eased to 2.990% after crossing the 3% mark on Tuesday. Traders should now watch out for the important level of EUR 12,520 which is also the 61.8 Fibonacci Retracement level.
After days of sliding, the EUR/USD pair was still little moved today following the monetary policy statement from the ECB and the positive economic data from the US. The question now is whether the pair has finally found a floor or whether the downward momentum will continue. At this point, there is a likelihood that the pair will move higher as short sellers take profits.
The EUR/JPY pair powered up after the monetary policy decision from the ECB. The pair continued the upward momentum started in May 2016 when it reached a low of 109.08. It is now trading at 133.14. The pair is expected to be volatile tomorrow as the Bank of Japan releases its monetary policy decision. Traders should watch for the pair to either go down or test the three-year high of 137.5.