Euro rises as Mario Draghi delivers final monetary policy decision

Global stocks were generally positive today as the market received important news. Most of these reports were related to the ongoing earnings season. Most companies that reported today were mostly positive. These included industrial companies like 3M, Dow Inc, and Stanley Black & Decker. Yesterday, Tesla, PayPal, SouthWest Airlines, American Airlines, Ford, and Microsoft reported better-than-expected results. Meanwhile, Twitter stock declined sharply in premarket trading after its revenue and EPS missed analysts’ forecasts. The Dow and S&P 500 futures rose by 50 and 5 points respectively.

In Europe, the DAX reached its highest level in 17 months as the market hoped the Germany economy has hit a bottom. Recent data has shown that the country’s economy has been declining. This week, its central bank warned that it is likely in a recession. These fears accelerated today after flash manufacturing and services PMIs continued to decline. The two indicators came in at 41.9 and 51.2, which was lower than the consensus estimate of 42.0 and 52.0 respectively. This trend was the same in the EU, where the two declined to 45.7 and 51.8 respectively.

The euro rose slightly against the dollar after Mario Draghi delivered the final rates decision. The ECB left the deposit facility rate unchanged at minus 0.50% and the marginal lending facility at 0.25%. This was in line with what the market was expecting. Draghi said that the central bank was ready to adjust its instruments where necessary to achieve its inflation mandate. He also said that the bank would resume quantitative easing as previously guided. Draghi leaves a conflicted legacy. He is widely credited with saving the euro with his ‘whatever it takes’ statement. During his time as head of the bank, we saw increased job creation and a decline in the unemployment rate for the region. On the other hand, inflation targets of just below 2% have not been consistently met. 

In the United States, the impact of the ongoing trade war continued to be evident. Numbers from the government showed that durable goods orders declined sharply in September. The headline durable goods orders declined by -1.1% in September after gaining by 0.3% in August. Core durable goods orders declined by 0.3% in the month after gaining by 0.3%. Continuing jobless claims rose to 1.682k, which was worse than the expected 1.675k. On the positive side, initial jobless claims came in at 212k, which was better than last week’s 218k.

EUR/USD

EUR/USD pair rose slightly after the ECB decision and US durable goods data. It rose from the intraday low of 1.1118 to a high of 1.1150. This price is higher than the 28-day and 14-day moving averages while RSI has jumped. Volumes too have risen as evidenced by the accumulation/distribution indicator below. There is a possibility that the upward momentum will continue as the pair attempts to retest the previous high of 1.1180.

GER30

DAX index rose to a six-month high on hopes that German stocks had bottomed. The index has been on a strong upward trend since August 12 when it was trading at €11,263 and today, it reached a high of €12,910. The price is above the short, medium, and long-term moving averages on the four-hour chart. Oscillators like RSI and money flow index are at or near the oversold levels. While the index may continue with the upward trend, there is a possibility of a pullback as the earnings season continues.

XBR/USD

Crude oil price continued to soar as market participants digested yesterday’s inventory numbers and news that OPEC was considering more cuts in production. XBR/USD pair is trading at 61.25, which is its highest level since September 27. On the four-hour chart, this price is above the 14-day and 28-day moving averages and above the 38.2% Fibonacci Retracement level. RSI has moved to the overbought territory. The pair may continue to move high as it attempts to test the 50% Fibonacci level at 62.34.