Sterling falls after BOE retreats from plans of further rate hikes

The euro declined today after the European Commission reduced the growth forecast for the region. The commission expects the economy to grow by 1.3%, which will be lower than the previous estimate of 1.9%. The economy will expand by about 1.6% in 2020. These forecasts are even lower than those issued by IMF and ECB, which said that the EU economy will expand by 1.6% and 1.7% respectively this year. This came after notable economic forecast reductions by the three biggest countries of the region including Germany, France and Italy.

The kiwi declined sharply today after New Zealand released weaker jobs numbers for the fourth quarter. The numbers showed that the unemployment rate increased by 4.3% in the fourth quarter. This was higher than the expected 4.1% and the third quarter’s 3.9%. The participation rate for the quarter rose by 70.90%, which was lower than the expected 71%. This was also lower than the third quarter’s rate of 71.10%. The employment change for the quarter rose by just 0.1%, which was lower than the expected 0.3%.

The sterling reached a two-week low after the Bank of England (BOE) released the monetary policy statement. As expected, the members of the monetary policy committee left interest rates unchanged and reduced the economic guidance to the lowest level since 2009. It now expects the economy to grow by 1.2% this year. The bank also retreated from earlier plans for more rate hikes this year. The bank joined other global central banks like the Fed, RBI (India), RBA and BOC in stepping back from previous guidance of tightening monetary policy.  

NZD/USD

The NZD/USD pair declined sharply today after the weak employment numbers from the country. The pair had its worst day in more than one year and saw its price reach an intraday low of 0.6745. On the eight-hour chart, the pair is closer to the 38.2% Fibonacci Retracement level. It is also below the 50-day and 25-day EMA while the RSI has moved to below the oversold level of 30. The pair will likely continue moving lower to the 50% Fibonacci Retracement level of 0.6637.

EUR/USD

The EUR/USD pair continued the declines started last week and reached an intraday low of 1.1323. This price is below all the major moving averages as shown below. The current price is below the 23.6% Fibonacci Retracement level, while the 20-day RSI has moved to below 30. There is a likelihood that the pair will continue moving lower, to potentially test the important support of 1.1300.

GBP/USD

The sterling declined sharply after the ECB released its interest rates decision. The pair reached an intraday low of 1.2855. This was the lowest level since January 22. The pair’s current price is below the 25, 50 and 100-day EMAs. The RSI has also moved lower than the overbought territory of 30 while the Parabolic SAR points to a lower movement. However, since the announcement by the BOE was already priced-in, there is a likelihood that the pair will start moving upwards.