Euro jumps after ECB release dovish monetary policy statement
The euro rose after the ECB released the monetary policy statement. As expected, the bank left interest rates unchanged at the current zero levels. The rates on the marginal lending and the deposit facility will remain at the current 0.25% and -0.40%. The bank also pushed the period it expects to raise rates to ‘at least through the first half of 2020.’ It also left open the chances that the rates will stay at these levels as long as necessary. It also pledged to continue reinvesting in full the principal payments from mature securities bought during the QE era that ended in December. On TLTRO, the level will be set 10 basis points above the average rate applied to the EU’s normal refinancing operations.
US futures pointed to a higher open as investors cheered the announcements by the Fed that it could lower interest rates. Analysts are now pricing in a rate cut during the September meeting. The S&P and Dow Futures rose by 70 and 8 points respectively. Meanwhile, data from the US showed that exports declined in May to $206.8 billion from April’s $211 billion. Imports declined to $257 billion while the trade deficit widened to $51 billion from the previous $50 billion. The initial jobless claims rose to $218k while the continuing jobless claims rose to 1,682K. The non-farm productivity decreased to 3.4% from the previous 3.6%.
Gold continued to rise as investors continued to worry about the ongoing trade war. Yesterday, senior Mexican officials were in Washington, where meetings took place to avoid the upcoming tariffs. These meetings will continue today, with key Mexican ministers expected to meet with Mike Pence, Robert Lighthizer, and Mike Pompeo. While Mexico has continued to arrest illegal immigrants, Trump has asked the country to do more. As a result of these tensions, the country’s credit rating was lowered yesterday by Fitch and Moody’s.
After declining sharply earlier today, the EUR/USD pair reversed today after the ECB decision. The pair is now trading at 1.1295, which is along the upper line of the Bollinger Bands. The Average True Range, which is a measure of volatility has continued to rise while the standard deviation has started moving downwards. The pair is likely to remain along these levels as traders wait for the important NFP data expected tomorrow.
The XAU/USD has been on a strong upward trend this month. The pair has risen from a low of 1275 and reached a high of 1345. It is now trading at 1336, boosted by the ongoing trade skirmish. On the six-hour chart, the price is above the 50-day and 25-day moving averages. The RSI and money flow index have continued to remain above the overbought levels. The pair is likely to continue to rise as investors continue to worry about trade. However, the NFP number could change this tomorrow.
The EUR/GBP pair has been on a strong upward rally. In the past month, the pair rallied from a low of 0.8490 and reached a high of 0.8900 yesterday. On the six-hour chart, this price is above the 25-day and 50-day moving averages. The accumulation/distribution indicator has continued moving higher while the money flow index has been declining. The pair could reverse once investors gets a good indication on who will replace Theresa May as prime minister.