13 Sept: Euro has a volatile ride on the ECB announcment. Risk sentiment generally well underpinned. US R/S today.

By | September 13, 2019

The Euro had a volatile ride following the ECB monetary policy announcements  and after an early plunge to important support at 1.0925, it then rebounded strongly to finish the session just below the highs of the day in what seems to have been a classic case of “sell the rumour/buy the fact”. The ECB cut the deposit rate by -10 bps to -0.5% and reintroduced QE, at Eur 20bio per month, starting from 1 November. At the same time, the the economic projections downgraded GDP growth forecasts to +1.1% and +1.2%, from +1.2% and +1.4%, for 2019 and 2020 respectively, while the inflation forecasts were also revised lower to +1.2%, +1% and +1.5%, from +1.3%, +1.4% and +1.6%, from 2019 through 2021.

Elsewhere, in the FX markets, US$Jpy is firm while hanging on to the current positive risk sentiment, although the commodity currencies have headed mildly lower. Sterling seems pretty exhausted by Brexit and has chopped around within its recent range, with traders apparently as confused as everyone else by all the conflicting headlines.

In other markets, stocks are higher again, with the S+P approaching the all-time highs, underpinned by the apparent thaw in US China trade relations. China is looking to narrow the scope of its negotiations with the US, to trade matters only, putting the thornier national-security issues on a separate track in a bid to break deadlocked talks in hoping that such an approach would help both sides resolve some immediate issues and offer a path out of the impasse.

The commodities had a volatile ride, with WTI losing around 1.5% by the end of the session, while the metals were choppy, with Gold seeing a $25 rally before giving up all the gains to finish pretty much unchanged at just under 1500.  WTI was the victim of the fact that the previously sanctioned Iranian supplies might be reintroduced to the market if a thaw in US/Iran relations can be engineered, which French President Macron seems to trying to do.

The major US data on Thursday was pretty much in line with expectations and had little immediate impact on the price action as it was released at the same time as Mario Draghi’s Press Conference. The US August CPI came in at +1.7%, vs +1.8% yy expected, just below market expectations  although the ex-food and energy figure was slightly higher, at  +2.4% vs +2.3% expected (2.2% prior). The US weekly initial jobless claims came in at 204K vs 205K expected.

Friday will see a thin calendar, and with China on holiday there is little to come from elsewhere in Asia (NZ Business PMI) or from Europe (EU Trade Balance for July). The main event will be the US Retail Sales for August (exp 0.3%mm), Business Inventories (exp 0.1%mm – July) and the Michigan Consumer Sentiment Index for September (exp 94.0). Have a good weekend.

Economic data highlights will include:

Fri: NZ Business PMI, China Mid-Autumn Festival Holiday, Eurogroup Meeting, EU Trade Balance, US Retail Sales, Import Export Index, Michigan Consumer Sentiment Index, Business Inventories

Market moves, in brief:

FX: DXY 98.37 (-0.26%)

Bonds: US10Y; 1.774% (+2.12%), German 10Y; -0.539% (+4.47%), UK 10Y; +0.576% (+2.16%), Australian 10Y; 1.159% (+0.68%), NZ 10Y; 1.295% (+2.78 %), China 10Y; 3.088% (+1.8%)

Stock Indices: DJI; +0.17%, S+P; +0.29%, NASDAQ; +0.3%, EUStoxx50; +0.63%, FTSE100; +0.09%, Shanghai Composite; +0.75%,

Metals: Gold $1499 oz (+0.15%), Silver $18.10 oz (-0.10%), Copper $2.6410 lb (+1.01%), Iron Ore $94.14 per tonne (NYMEX) (+1.95%),

Oil: WTI $55.07 pb (-1.57%)

CURRENCIES
EURUSD: 1.1064
Res  1.1085  1.1115  1.1145
Sup  1.1040  1.1015  1.0990
USDJPY: 108.11
Res  108.20  108.50  108.80
Sup  107.85  107.50  107.20
GBPUSD: 1.2337
Res  1.2385  1.2435  1.2485
Sup  1.2300  1.2250  1.2205
USDCHF: 0.9904
Res  0.9925  0.9945  0.9965
Sup  0.9890  0.9870  0.9850
AUDUSD: 0.6864
Res  0.6880  0.6900  0.6925
Sup  0.6850  0.6825  0.6800
NZDUSD: 0.6407
Res  0.6420  0.6435  0.6450
Sup  0.6400  0.6385  0.6370
INDICES / COMMODITIES
S&P.fs: 3011.03
Res  3020.00  3035.00  3050.00
Sup  3000.00  2985.00  2970.00
DJ30.fs: 27193.00
Res  27230.00  27315.00  27405.00
Sup  27060.00  26950.00  26845.00
SPI200.fs: 6673
Res  6685  6700  6715
Sup  6655  6640  6625
XAUUSD: 1498.22
Res  1505.00  1525.00  1515.00
Sup  1490.00  1480.00  1470.00
XAGUSD: 18.07
Res  18.20  18.35  18.50
Sup  17.95  17.80  17.65
WTI.fs: 55.06
Res  55.75  56.45  57.15
Sup  54.35  53.55  52.80

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