Forex signals US short meeting, January 23 – The ECB leaves things as they are
It started today on a positive basis, as came in better than expected for December. New jobs rose more than expected, while the unemployment rate was lower at 5.1%.jumped more, but markets still expect rates to decline from Australia, as Westpac also suggested earlier today. So AUD // USD is not going anywhere now. The president of the Swiss National Bank Jordan gave a speech this morning, saying they are not manipulating the currency, but then reiterated that the SNB is ready to intervene if the overvalued CHF continues to strengthen.
The European Central Bank held its today and markets expected some direction from them, as inflation rose from 0.7% last year and has now stabilized at around 1.3%. Lagarde also acknowledged the improvement in economic sentiment, but pledged to keep rates stable or lower if inflation does not move towards the ECB’s 2% target, which will take a long time. So they left things as they are, basically waiting for things to develop, so there is no direction in forex yet.
- The UK leaves the door open for Huawei on the G5 – China is pushing for a strong 5G entry into Europe, but the US is pushing back. The UK has hinted that it will be on the US side this day, and this morning the UK’s business secretary, Andrea Leadsome, said she would make the final decision on Huawei ‘soon’. But Reuters reported later, citing two people who know that British officials are reportedly recommending Huawei’s limited role in the 5G network.
- The SNB’s Jordan is reacting to the list for the supervision of the American currency – the President of the Swiss National Bank, Thomas Jordan, spoke earlier today on CNBC. He’s trying to tell us / the US not to mess with Franco, after they’ve put them on the list of countries manipulating their currency, but we all know they have.
- He does not currently see a new minimum exchange rate
- We are not manipulating the exchange rate of the Swiss franc
- The franc exchange rate is important in relation to Swiss monetary conditions
- Negative rates are a necessity
- Negative rates have side effects, and the SNB is trying to reduce those side effects
- The risk balance is tilted downward
- The SNB pursues an independent monetary policy, not following the ECB
- But the international environment needs to be taken into account
- The SNB could still reduce rates if necessary
- Franc is still highly regarded
- It must maintain negative rates, interventions
- The SNB can intervene as needed
- China is stepping up coronavirus measures – Wuhan is in actual quarantine for fear that a new coronavirus outbreak will become more widespread, and China will suspend buses and ships to Wuhan. Beijing later announced that it would cancel all major events, including the celebration of the Chinese New Year due to the outbreak of a new coronavirus.
- ECB statement – The European Central Bank held a meeting today and they published their statement shortly before. They expected interest rates to remain unchanged. ECB rates
- Possibility of deposit -0.50%
- Main refinancing rate 0.00%
- Possibility of marginal loan 0.25%
- Rates will remain at current or lower levels until the inflation outlook is firmly close to the target, which is reflected in core inflation
- Announces first strategic policy review since 2003
- Further details on the scope, schedule of reviews will be announced later at 1430 GMT
- The redemption of the bonds will continue just before the interest rate hike
- ECB Press Conference – ECB President Christine Lagarde held a regular press conference following the decision on the rate. She said the incoming data is in line with the baseline scenario. The manufacturing industry remains lagging behind, but employment growth continues to support the economy. There are some signs of rising inflation that are in line with expectations. In light of the continuing subdued inflation outlook, monetary policy must remain stimulating for a long time. We will closely monitor inflation. We will closely monitor inflation. The ECB is ready to adjust all instruments as needed and committed to inflation symmetry. Inflation in the euro area rose by 0.3% q / qu Q3 compared to + 0.2% in Q2. Poor growth reflects the weakness of global trade.
- According to Mnuchin, the United States is preparing to cut taxes again – US Treasury Secretary Mnuchin spoke earlier in Davos, saying that we have started working on tax cuts of 2.0. He made a bunch of comments, and the ad follows: Finance Minister Mnuchin speaks from Davos on CNBC
- The US is a bright spot for global growth
- Increasing the deficit increases government spending
- The growth of government spending must slow down
- The US cannot maintain the level of the deficit and the government must reduce spending
- The president is looking at tax cuts 2.0 that will focus on the middle class
- We must continue to encourage the middle class
- the tax cuts will pay for themselves
- It supports a stable dollar
- Deficits are reasonable versus GDP, but we need to grow to reduce them over time
- U.S. companies / CEOs should continue to feel comfortable doing business with Saudi Arabia
- There is no doubt that the US wants to expand the possibility of borrowing
- It will take a little more time to create a 50-year and a hundred-year relationship.
- U.S. Unemployment Claims – Unemployment claims used to be around 220,000, but two weeks ago they dropped to 204,000. It was expected to increase last week, but it did, but the increase was smaller than expected.
- initial requirements for the unemployed 211K versus the 214K estimate
- from the previous month revised to 205 thousand from 204 thousand previously reported
- the four-week average of initial receivables 213.25K vs 216,250K
- continuing claims 1731K versus estimate 1750K
- previous month revised 1768K compared to 1767K previously reported
- a four-week average of 1757.75 thousand compared to 1755.5 thousand previously reported
- The highest growth in initial receivables for the week ended January 11 was recorded in California (+15,273), Texas (+9,535), Missouri (+3,439), Florida (+2,244) and Arizona (+1,522),
- The largest declines were recorded in New York (-21,532), Wisconsin (-4,599), South Carolina (-2,842), Connecticut (-1,866) and New Jersey (-1,856).
He trades in sight
Like a bull EUR / USD
- The return higher for this couple is over
- The trend has turned bearish
- MAs turned into resistance
50 SMA has now turned into resistance
The EUR / USD has been bearish for about two years now, but has reversed more in October and has been rising ever since. Improving sentiment in financial markets due to comments on the first phase of a deal between the US and China signed this month and the prospects of the UK going to the polls, helped the situation further.
Cash flows at the end of the year gave the couple another boost at the end of last year. But the rise ended as soon as the new year was underway, and geopolitical tensions between the U.S. and Iran hurt sentiment in financial markets, sending risky assets lower.
As a result, the withdrawal ended more and the larger bearish trend resumed. Peaks were declining, moving averages were turning into resistance, and 50 SMA (yellow) was offering resistance this week. Earlier today we saw a jump higher after the ECB meeting, but the climb ended again at 50 SMA. So sellers remain responsible for this pair, and the ECB has pledged to keep rates negative or lower until inflation climbs to the ECB’s target of around 2%, so that will last and the Euro is likely to remain bearish in the meantime.
Markets are waiting for the ECB today to see if there will be prejudice for the coming months, after several green blows from the eurozone in recent months. The ECB recognized the stabilization of inflation after it rose below 1% where it reached the bottom, but they remained cautious and flexible, so basically the same as at the last meeting.