Euro rises as the ECB leaves rates unchanged
The British pound declined today as traders reacted to the failed dinner meeting between Ursula von der Leyen and Boris Johnson. The three-hour meeting ended without any solid agreement. Instead, the two leaders asked their negotiators to table a deal by Sunday. The pair also reacted to the widening UK trade deficit. According to the Office of National Statistics, the overall trade deficit widened to £12 billion in October. That was a bigger increase than the £9.6 billion that analysts were expecting. The non-EU deficit widened to more than £4.54 billion. Meanwhile, manufacturing and industrial production increased by 1.7% and 1.3%, respectively.
The euro rose against the US dollar after the final interest rate decision by the European Central Bank (ECB). As was widely expected, the bank decided to leave interest rates unchanged. The bank also decided to add €500 billion to its current 1.35 billion quantitative easing program in its bid to continue supporting the economy. The currency also rose because of optimism that the EU will reach a budget deal in their meeting today. In a statement yesterday, Andrzej Duda, the Polish prime minister, said that the opposing sides had reached a preliminary agreement. Once reached, the deal will unlock the €750 billion recovery fund and the €1.8 trillion seven-year budget.
The US dollar index dropped today after the Bureau of Labour Statistics (BLS) released the country’s inflation data. The headline CPI rose by 0.2% in October leading to an annualised rise of 1.2%. At the same time, the core CPI rose by 0.2% and by 1.6% on a year-on-year basis. These numbers are still below the official Fed target of 2.0%. Further data showed that the initial jobless claims rose by 853,000 last week while the continuing claims rose to 5.7 million.
The EUR/USD pair rose to a high of 1.2100 after the ECB decision. On the daily chart, the price is slightly lower than this year’s high of 1.2177. It is also slightly above the important resistance level of 1.2012, which was the highest level in June. The price remains above the 15-day and 25-day moving averages while the Relative Strength Index (RSI) has moved below the overbought level of 70. Therefore, the pair will likely remain at the current range in the near term.
The GBP/USD pair dropped to an intraday low of 1.3300, which is lower than the YTD high of 1.3537. On the four-hour chart, the 14-day and 28-day moving averages have made a bearish crossover while the signal and main lines of the MACD have moved below the neutral line. The Williams % range has moved to the oversold level. Therefore, while the pair is likely to experience intense volatility, the path of least resistance is looking to be lower.
The USD/JPY pair rose to an intraday high of 104.57. This price is higher than this week’s low of 103.66. On the four-hour chart, the price has managed to move above the 15-period and 25-period moving averages. It is also slightly below the previous double-top at 104.75 while the Stochastic Oscillator has moved close to the overbought level. Therefore, the pair is likely to continue rising as bulls aim for the double-top level.