The
United States and Europe have reached a deal to work towards “zero tariffs,
barriers and subsidies on non-auto industrial goods” in a bid to defuse
escalating trade tensions. Investors took comfort in the encouraging meeting
outcome, with Asian stocks edging higher this morning following overnight gains
on Wall Street. While the positivity from Asia could carry over into European
markets, caution ahead of the looming ECB policy meeting may restrict the
upside momentum.
Will the European
Central Bank surprise markets?
Today’s
main event risk for the Euro will be the European Central Bank monetary policy
decision, which is widely expected to conclude with interest rates left
unchanged at 0.00%.
Although
July’s meeting will not include fresh economic projections, investors should
not be quick to expect the meeting to be a snoozer. Much of the attention will
be directed towards Mario Draghi’s press conference for further insight into
rate hike timings and thoughts on global trade developments.
With
the ECB already unveiling its tapering blueprint and stating that interest
rates would remain at ultra-low levels, "at least through the summer of
2019", Draghi may simply reiterate the message of June’s policy meeting.
While economic data from Europe remains positive with inflation hitting the
golden 2% level, global trade tensions continue to weigh on sentiment. http://www.tectono-business.com/2016/02/contemporary-step-by-step-guide-to.html
Will
Draghi be able to maintain a positive stance on the Eurozone economy without
causing the Euro to appreciate aggressively? Alternatively, the Euro could take
a hit if he decides to strike a cautious tone by focusing purely on global
trade tensions and reiterate how interest rates will remain unchanged until
Summer 2019.
Regarding
the technical picture, the EURUSD continues to find comfort within a wide range
on the daily charts. However, the breakout above 1.1700 could encourage an
incline towards 1.1768 and 1.1790, respectively.
Dollar bulls take
a short break
King
Dollar tumbled to a two-week low against a basket of major currencies after the
US and the European Union agreed on steps to de-escalate trade tensions. http://www.tectono-business.com/2016/02/contemporary-step-by-step-guide-to.html
The
downside was complimented by disappointing new homes sales data from the United
States which encouraged sellers to attack. There is also a suspicion that the
Dollar’s depreciation could be attributed to a bout of profit taking ahead of
Friday’s highly anticipated US GDP report. While the Dollar could depreciate
further in the near term, market speculation of higher US interest rates this
year is likely to limit the downside losses. Focusing on the technical picture,
the Dollar Index has scope to hit 94.00 in the near term.
Commodity
spotlight – WTI Oil
Oil
prices edged higher on Thursday morning after the Energy Information
Administration reported a large drawdown in US Crude inventories. A softer US
Dollar has also complemented the upside with prices trading around $69.30 as of
writing. Focusing purely on the technical picture, WTI Crude could appreciate
back towards $70.00 if bulls are able to conquer the $69.60 level.
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