Euro Outlook, EUR/GBP, EUR/USD, ECB Minutes – Talking Points
- Euro may rise on ECB meeting minutes, but coronavirus concerns could trim its gains
- EUR/GBP, EUR/USD may recover lost ground after both declined to multi-year lows
- US Dollar rose on FOMC meeting minutes. What were some of the main takeaways?
ASIA-RECAP: AUD FELL ON AUSTRALIAN JOBS DATA
Asia-Pacific equities were mixed heading into Thursday’s session despite China’s Hubei province reported an additional 108 deaths from the coronavirus. The Australian Dollar fell after local jobs printed a higher-than-expected unemployment rate figure of 5.3 percent a 32.7k contraction in part time jobs for January. To get a more in-depth look at the data and the outlook for the Australian Dollar, see the full report here.
AUD/USD – 15-Minute Chart
AUD/USD chart created using TradingView
FOMC MINUTES TAKEWAYS, US DOLLAR REACTION
As forecasted, the Greenback rose following the release of the FOMC meeting minutes with the US Dollar index (DXY) stopping just short of the October high at 99.67. In it, the Fed reiterated that economic conditions as they stand do not warrant an adjustment of interest rates in either direction. Officials warned that the coronavirus is weighing on the outlook as a new fundamental uncertainty.
Policymakers also said they were okay with inflation rising modestly above their 2 percent target for some time. After the minutes were released, President of the Federal Reserve bank of Altana Raphael Bostic said the economy in the jobs portion is doing “quite well”. However, he warned that the coronavirus and upcoming US Presidential election creates uncertainty for businesses and makes forecasting difficult.
President of the Federal Reserve Bank of Minneapolis Neel Kashkari echoed concern about the Wuhan virus and said the US will not likely be immune to the contagion effect of a slowdown in Asia. Mr. Kashkari also sent a chilling message about his outlook on trade, saying he does not have confidence trade issues will get better and that he is taking a “wait and see” approach to matters pertaining to international cross-border sales.
EURO FORECAST AHEAD OF ECB MINUTES
The ECB minutes from the January 23 meeting may push the Euro higher and help it recover some of its recent losses, particularly against CAD and USD. In the monetary policy statement, officials said highlighted signs of stabilization with incoming data falling in line with the central bank’s baseline scenario. The report stated that while underlying inflation remains subdued, there were signs of a moderate increase.
Policymakers emphasized the need for accommodative stance for a prolonged period of time and a continuation of its asset purchase program (APP) amid weak international trade and geopolitical risks. At the time, the report said downside risks have become less pronounced, but the coronavirus has rekindled concern about Eurozone growth as funds flow out of Germany amid fears it is on the verge of a recession.
EUR/USD TECHNICAL OUTLOOK
EUR/USD may be staging what could be a near-term recovery if it is able to surmount the upper layer of the 2017 range between 1.0783 and 1.0828. However, gains may be capped, and a retreat may ensue if EUR/USD capitulates in the face of the December downtrend (labelled as “Beta”). The ECB minutes may be the necessary catalyst to propel EUR/USD higher – or further pressure it to multi-year lows.
EUR/USD – Daily Chart
EUR/USD chart created using TradingView
EUR/GBP PRICE CHART
EUR/GBP appears to be showing signs of what could be a modest recovery ahead as it bounces back from support at 0.8297 (white-dotted line) after failure to clear resistance at 0.8533. The pair’s upside progress may encounter some friction 0.8389 (gold-dotted line). However, if EUR/GBP manages to clear it, the next barrier to break will be the ceiling at 0.8533 where the pair retreated from in early February.
EUR/GBP – Daily Chart
EUR/GBP chart created using TradingView
EURO TRADING RESOURCES
— Written by Dimitri Zabelin, Jr Currency Analyst for DailyFX.com
To contact Dimitri, use the comments section below or @ZabelinDimitrion Twitter