EUR/USD: ECB retained its benchmark interest rate at record low


EURUSD Movement

For the 24 hours to 23:00 GMT, the EUR rose 0.81% against the USD and closed at 1.2022, after the European Central Bank (ECB) President, Mario Draghi, hinted that the long-awaited decision about scaling back the ECB’s quantitative easing programme would likely come in next month.

The ECB, at its latest monetary policy meeting, opted to leave the key interest rate unchanged at a record low level of 0.00% and pledged to continue its bond-buying programme through December 2017 and possibly beyond if needed. In a post-meeting statement, the ECB President stated that the governing council had held early talks on how long to maintain its extraordinary stimulus efforts and added that the central bank will make the “bulk” of its decisions in October.

Gains in the Euro were boosted further, after the ECB upgraded the Euro-bloc’s growth outlook, now expecting the common currency region to grow 2.2% in 2017, up from a previous forecast of 1.9%, given the region’s improving fundamentals. However, the central bank lowered its forecasts for inflation to 1.2% next year from 1.3% previously and to 1.5% in 2019 from 1.6%.

On the macro front, the Euro-zone’s seasonally adjusted final gross domestic product (GDP) rose 0.6% on a quarterly basis in the second quarter of 2017, in line with the preliminary figures. In the previous quarter, GDP had advanced by a revised 0.5%.

Separately, Germany’s seasonally adjusted industrial production surprisingly remained flat on a monthly basis in July, compared to market consensus for a rise of 0.5%. In the previous month, industrial production had dropped 1.1%.

The greenback lost ground against its major counterparts, after data indicated that the number of Americans filing for fresh jobless claims jumped to a level of 298.0K in the week ended 02 September, hitting its highest level in more than two years. Meanwhile, market participants had expected initial jobless claims to advance to a level of 245.0K, after recording a level of 236.0K in the prior week. On the other hand, the nation’s IBD/TIPP economic optimism index advanced more-than-anticipated to a level of 53.4 in September, compared to a reading of 52.2 in the prior month.

In the Asian session, at GMT0300, the pair is trading at 1.2075, with the EUR trading 0.44% higher against the USD from yesterday’s close.

The pair is expected to find support at 1.1963, and a fall through could take it to the next support level of 1.1851. The pair is expected to find its first resistance at 1.2138, and a rise through could take it to the next resistance level of 1.2201.

Moving ahead, investors will focus on Germany’s trade balance figures for July, slated to release in a few hours. Moreover, the US final wholesale inventories and consumer credit change, both for July, will be on investors’ radar.

The currency pair is trading above its 20 Hr and 50 Hr moving averages.

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