Euro Rallies As ECB Postpones Rate Hike Deadline

Euro Rallies As ECB Postpones Rate Hike Deadline
June 7, 2019

 

The euro hit new multi-week highs yesterday after the European Central Bank revealed the guidelines for its TLTRO III (Targeted Longer-Term Refinancing Operations) facility, which were a cut above than expected. Upbeat German factory orders data also supported the rally. From a low of 1.1201, the EUR/USD currency pair rallied to a high of 1.1285 after Mario Draghi, President of the ECB, postponed the rate hike deadline while raising the inflation outlook.

The Federal Statistical Office reported that the German industrial orders increased 0.3% in April, beating Thomson Reuters estimates calling for 0.1% growth. The March reading was upwardly revised to 0.8%, from 0.6%. The figures indicate that Europe’s largest economy remains strong despite uncertainty related to Brexit and the US-China trade spat.

The Eurostat reported that the employment or job growth in the Eurozone economy increased 0.3% in the first quarter, unchanged from the prior quarter and in line with analysts’ estimates. The statistical agency also revealed that the Eurozone GDP grew 0.4% in the first quarter. The reported figures also met analysts’ estimates. On a y-o-y basis, the economy grew 1.2% in the first-quarter of 2019.

The pair started making new highs after the ECB revealed information regarding TLTRO III.

The central bank left the interest rates on its marginal lending and deposit facility unchanged at 0%, 0.25% and -0.40%, respectively. The rates have remained at record low levels since 2011.

More importantly, the ECB surprised markets by stating that the governing council now anticipates “the key ECB interest rates to remain at their present levels at least through the first half of 2020.”

Commenting on the economic sentiment, Draghi said, “The prolonged presence of uncertainties related to geopolitical factors, the rising threat of protectionism and vulnerabilities in emerging markets is leaving its mark on economic sentiment. Looking ahead, the governing council is determined to act in case of adverse contingencies.”

Additionally, Draghi also issued a new outlook for economic growth and inflation. According to the latest forecasts, the ECB expects GDP growth of 1.2% this year, a notch (0.1%) above the earlier forecast issued in March. For 2020, the ECB expects the economy to grow at 1.4%, a decrease of 0.2% from prior view.

Likewise, the ECB upwardly revised its inflation outlook for 2019 to 1.3%, an increase of 0.1% from its earlier outlook issued in March. In the meantime, for 2020, the ECB downwardly revised its forecast to 1.4%, a decrease of 0.1% from its prior outlook issued in March. The impressive GDP and inflation outlook, and postponement of a rate hike are anticipated to keep the EUR/USD currency pair bullish in the short-term.

Technically, the EUR/USD pair is ascending after consolidating at 1.1200 levels. The pair is trading above its 50-day moving average, and the RSI indicator is also having a reading of over 50. As a result, we can expect the EUR/USD pair to move up in the short-term.

EUR - technical analysis - 7th of June 2019

Disclaimer: Any financial trading analysis offered here is our opinion and is not intended as advice or direction for investors. We cannot guarantee the success of any trades made as a consequence of this article, and we encourage traders to incorporate a strong money management strategy to limit losses when they enter the markets. Please use this article as part of your own research before formulating strategies prior to trading.

 

Ian Maguire

Ian Maguire

Ian is our resident contributor to the latest going ons in the cryptomarket, keeping up to date with the latest icos and coins


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