iFOREX Daily Analysis – 11/03/2016
iFOREX | Mar 11, 2016 05:04AM ET
The dollar turned broadly lower against the other major currencies on Thursday, erasing a more than 1% rally, after European Central Bank President Mario Draghi said interest rates aren’t likely to be cut again.
Initially the euro weakened after the ECB cut interest rates across the euro zone to new record lows and boosted its quantitative easing program. The ECB wrong footed markets by cutting its benchmark interest rate to a record-low of zero from 0.05%, while market watchers had been expecting no change. It also cut the deposit facility rate deeper into negative territory, to minus 0.4% and cut the marginal lending rate cut to 0.25% from 0.30%. In addition, the Central Bank boosted its quantitative easing program by €20 billion per month to €80 billion, starting in April, with investment-grade bonds added to the mix of assets eligible for purchase.
Furthermore, it also announced new series of four targeted longer-term refinancing operations to be launched in June. But the euro rebounded after Draghi said the ECB did not anticipate that it will be necessary to reduce interest rates further, but added that this could change.
Always on Thursday, in the U.S., the Department of Labor said the number of individuals filing for initial jobless benefits in the week ending March 5 decreased by 18,000 to 259,000 from the previous week’s total of 277,000, while analysts expected jobless claims to fall by 2,000 to 275,000 last week.
Today the U.K. is to release data on the trade balance; Canada is to release its employment report for February; and the U.S. is to round up the week with data on import prices.
EUR/USD
The single currency closed sharply higher on Thursday, erasing massive losses earlier in the session, as Mario Draghi pushed the euro dramatically upward by vowing not to cut interest rates any further after the European Central Bank adopted a wide range of stimulus measures at a closely-watched meeting.
The euro initially weakened sharply after the ECB cut interest rates across the euro zone to new record lows and boosted its quantitative easing program by €20 billion per month to €80 billion, starting in April. But it reversed losses against the other major currencies after European Central Bank President Mario Draghi said interest rates aren’t likely to be cut again, after delivering a stronger-than-expected package of stimulus measures.
The currency pair traded in a broad range between 1.0823 and 1.1217, before settling up 1.75% on the session.
Today investors’ focus will be on U.S. data on import prices.
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Gold
Gold prices initially tumbled along with the euro on Thursday, after the European Central Bank cut interest rates across the euro zone to new record lows and boosted its quantitative easing program.
But the precious metal rebounded from the sharp losses in North American trade, battling back along with the euro, and closing sharply higher, after ECB President Mario Draghi said interest rates aren’t likely to be cut again after delivering a stronger than expected package of stimulus measures.
Meanwhile, the U.S. Department of Labor said the number of individuals filing for initial jobless benefits decreased by 18,000 last week, to hit a five-month low of 259,000. It is the first time that jobless claims have held below the 300,000-level for 52 consecutive weeks, which is usually associated with a firming labor market.
Today the U.S. is to round up the week with a report on import prices, which will be closely watched by gold trader, for further information on the strength of the green back.
WTI Oil
U.S. crude futures closed slightly lower on Thursday, paring losses from earlier in the session, after reports surfaced that a highly-anticipated meeting between OPEC and Non-OPEC producers will not be held on the 20th of March in Russia in order to discuss an output freeze, unless the top participants can win the support of a defiant Iran.
The biggest roadblock to a wider deal is Iran, infact Tehran feels it should be exempt from the agreement as it wants to recover market share it lost under Western sanctions.
WTI crude for April delivery traded in a broad range between $37.22 and $38.47 a barrel, before settling down 1.36% on the session.
Today investors’ focus will be on Baker Hughes weekly data on the U.S. oil rig count.
US 500
U.S. stock indexes ended a volatile session little changed on Thursday after the European Central Bank reduced interest rates but ECB chief Mario Draghi confounded investors who expected multiple rate cuts by saying more were unlikely.
Stocks jumped early in the day after the ECB pushed its deposit rate deeper into negative territory and increased its asset-buying program, but after, when Draghi said future cuts would happen only under extreme circumstances, investors expecting even lower rates switched their strategy to risk off.
The Dow Jones industrial average fell 0.03%, the S&P 500 gained 0.02%, and the Nasdaq Composite dropped 0.26%.
Now investors’ focus will be on the Fed meeting of March 15-16, because the U.S. Federal Reserve has said it is on track to raise interest rates gradually this year, but its decision remains data-dependent.
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