Euro Licks Its Wounds After ECB Growth Forecast Cut; NonFarm Payrolls Next
Ashraf Laidi | Mar 08, 2019 08:08AM ET
The euro licks its wounds ahead of the U.S. Non-Farm Payrolls after Thursday's sharp downward revisions from the ECB. The central bank pushed out guidance and announced a new round of targeted loans in a series of moves that put the euro into a tailspin.
The yen is the winner of the day after intensifying risk-off phase in indices. Canadian and U.S. employment data is coming up next. The EUR/USD Premium short was stopped out by 3 pips (1.1177 low vs 1.1180 stop), while the short DOW30 was closed for 400-pt gain. A new Premium trade has been issued moments ago.
We warned yesterday that an extension in the ECB's forward guidance was overdue but they had hinted at a reticence to make a change so few economists were forecasting one. Draghi decided to be more aggressive as the latest ECB forecasts cut the growth estimate this year to 1.1% from 1.7%.
In response, the ECB pushed out guidance on rate hikes through the end of the year and announced TLTROs. What was especially concerning was a warning from Draghi that risks remain tilted to the downside on growth and inflation. There were also reports afterwards that some governing council members believe growth is even softer.
A fall in the euro wasn't surprising but the way it cut through the 2019 and 2018 lows – both major support levels – is telling. The euro closed at the lowest since June 2017.
In the bigger picture, theUS dollar and yen were broadly stronger as risk aversion hit again. The S&P 500 fell back below the 200-day moving average. In FX, the dollar and yen are beginning to clear key medium-term levels. Notice that SPX is testing its 200-DMA, while the Dow 30 remains 200 pts away above its 200-DMA, a situation, which could suggest that DOW 30 may extend to 25130 before stabilizing.
With the recent pickup in risk aversion Friday's non-farm payrolls report bears closer watching. The consensus is for a 180K reading after the 304K jump in January. The risks are that a downside miss intensify the latest round of worries and hurt USD/JPY.
Get The News You Want
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.