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Euro Halts Rally Against Most Majors; ECB Rate Decision Eyed

Thursday, 09 February 2012 | 12:36
The euro paused previous session's rally against most of its major rivals in early European deals on Thursday as market is focusing to the European Central Bank rate decision, which is due out at 7.45 am ET.
Economists widely expect policymakers to maintain the rate at 1.00 percent. ECB President Mario Draghi is set to hold the regular post-decision press conference at 8.30 am ET.
Last month, the Governing Council led by ECB President Mario Draghi had decided to maintain the main refi rate at 1 percent that was in line with economists' expectations.
The bank has never cut the rate below 1 percent. Last year, the central bank under former chief Jean-Claude Trichet hiked interest rates twice.
The Eurozone finance ministers are set to discuss the Greek bailout again today after a seven hour long meeting between Greek Prime Minister Papademos and coalition leaders ended Wednesday with creditors' demand to make EUR 300 million cuts to state and private pensions reportedly remaining the main stumbling block.
In addition to the political level meeting as well as negotiations with the troika of creditors, Athens is also holding talks with its private lenders to persuade them to accept bigger write-downs on their debt holdings.
Despite the slow progress, optimism regarding reaching an agreement in the Greece debt swap negotiation lifted the euro in the Asian session.
However, the unexpected acceleration in China's inflation eased some positive sentiment, with the consumer price index rising 4.5 percent year-on-year in January, faster then 4.1 percent rise in the previous month. Economists expected a slowdown to 4 percent.
The single currency that broke past the key 1.33 level against the US dollar for the first time since December 12, 2011 failed to make any significant headway at the beginning of the European session.
The euro is presently trading around the 1.3280 level versus the greenback, having declined from a session's high of 1.3310. Any positive macro-economic factors could lift the pair above its 100-day SMA of 1.3335, or else it will re-test the 1.32 support level.
Against the yen, the single currency paused after having touched nearly a 2-month high of 102.79. Technically, a small descending triangle is formed in the 15-minute chart and a break-out could occur around the 102.50/40 level.
Japanese consumer confidence improved unexpectedly in January, monthly survey data from the Cabinet Office showed today. The consumer sentiment index climbed to 40 from 38.9 a month ago. Economists were expecting the indicator to fall to 38.5.
The euro that advanced above the 0.84 level against the pound for the first time in February in Asian trading shed almost 25-pips so far in the European session. The euro-pound pair is presently worth 0.8380 with 0.8330 seen as the next likely support level.
U.K. industrial production grew 0.5 percent month-on-month in December, offsetting last month's 0.5 percent decrease, data from the Office for National Statistics showed today. Economists had expected only 0.2 percent growth.
At the same time, manufacturing output grew 1 percent, faster than the 0.2 percent rise forecast by economists. In November, output was down 0.1 percent.
Meanwhile, the nation's trade gap narrowed more than expected in December to reach the smallest deficit since April 2003, data from the Office for National Statistics showed today.
The deficit on seasonally adjusted trade in goods and services was GBP 1.1 billion in December compared with the deficit of GBP 2.8 billion in November.
The euro moved broadly sideways against the Swiss franc on Thursday, trading between 1.2112 and 1.2096 in the Asian and the early European session. If the pair strengthens, it may re-test yesterday's 3-week high of 1.2130. Likely support for the pair is seen around the 1.2090 level.
Switzerland's consumer confidence improved modestly in January and surpassed economists' forecast, owing to improved expectations for the overall economic development, data from a survey by the State Secretariat for Economic Affairs (SECO) showed today.
The consumer confidence index moved up to -19 points in January from -24 points in October, when the previous survey was conducted. Economists expected the a reading of -22.
Looking ahead, the Bank of England is set to announce its rate decision at 7:00 am ET. The Monetary Policy Committee governed by Mervyn King is likely to raise the bond purchase programme to GBP 325 billion from GBP 275 billion. The interest rate is seen unchanged at a record low of 0.50 percent.
The U.S. customary weekly jobless claims for the weekended January 28 and the wholesale inventories data for December are expected to garner market attention in the New York session.
Source: RTT News

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