The ECB cuts rates, and the Euro gains; U.S. unemployment claims rise, and the DXY falls. The Asia session sees mixed market reactions. Key data: UoM Consumer Sentiment.
What happened in the U.S. session?
The European Central Bank (ECB) implemented a 60-basis-point reduction in its primary refinancing rate, lowering it from 4.25% to 3.65%. This decision aligns with the Governing Council’s updated outlook on inflation and economic growth, indicating a moderation in monetary policy as recent inflation figures met expectations. The ECB projects headline inflation at 2.5% for 2024 and a slight decline in the following years, while it expects economic growth to be slightly lower than previous forecasts. Despite the rate cut, the Euro appreciated overnight due to rising U.S. unemployment claims, leading to a significant dollar drop.
In the U.S., the Producer Price Index (PPI) showed mixed results, with the headline reading rising more than expected monthly, while the annual figure decreased from 2.1% to 1.7%. Core readings also exceeded forecasts. Unemployment claims increased to 230K, above the expected 227K, with the 4-week average trending higher, suggesting emerging labor market weakness. The dollar index (DXY) fell sharply to 101.22, marking its most significant daily decline since early September.
What does it mean for the Asia Session?
As Asian markets react to the ECB’s rate cut and U.S. unemployment data, the Euro should maintain its elevated position, trading around 1.1089, while the DXY stabilizes near the 101 level. However, continued pressure on the dollar could lead to a potential drop below 101 by the end of the day.
Key news events today
- University of Michigan Consumer Sentiment (2:00 pm GMT): Analysts expect the preliminary findings to show a slight increase from 67.9 to 68.3, reflecting an improved consumer outlook.
Market Focus: ECB Cuts Rates Boosts Euro, Dollar Drop
Market Expectations
- Dollar Index (DXY): Medium Bearish. Strong bids for the dollar earlier this week suggest a potential for a significant weekly gain, but the index could face downward pressure.
- Gold (XAU): Medium Bullish. The UoM Consumer Sentiment report could impact gold prices, which recent dollar strength has constrained below $2,530/oz.
- Australian Dollar (AUD): Medium Bullish. The AUD surged past 0.6700, with support at 0.6640 and resistance at 0.6750.
- New Zealand Dollar (NZD): Medium Bullish. The NZD climbed past 0.6150, with support at 0.6125 and resistance at 0.6235.
- Japanese Yen (JPY): Medium Bearish. Despite hawkish comments from the Bank of Japan, the Yen weakened, with support at 140.65 and resistance at 143.70.
- Euro (EUR): Medium Bullish. The Euro rose following the ECB’s rate cut, with support at 1.1000 and resistance at 1.1150.
- Swiss Franc (CHF): Medium Bearish. USD/CHF fell below 0.8500, with support at 0.8430 and resistance at 0.8560.
- Pound (GBP): Medium Bullish. The GBP strengthened above 1.3100, with support at 1.3035 and resistance at 1.3210.
- Canadian Dollar (CAD): Weak Bearish. USD/CAD fell overnight but stabilized around 1.3565. It may decline if oil prices remain strong, with support at 1.3490 and resistance at 1.3650.
- Oil: Medium Bullish. Crude oil prices rose due to disruptions in the U.S. Gulf of Mexico, with WTI reaching a high of $69.81 per barrel. Prices may breach the $70 mark, potentially marking the first positive close in five weeks.
Conclusion
The ECB’s monetary policy decision and U.S. unemployment data will influence today’s Asia session. Based on ongoing developments and key economic indicators, markets will drive currency pairs and commodities reactions.
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