Negative Sentiment Puts Additional Pressure on ECB
As sentiment within the Eurozone continues to decline, the ECB is stepping up its rhetoric in asking governments for assistance with policy to enhance economic growth. Despite a declining Euro, and soft policy the ECB is moving closer to a full blown QE program that will likely need to be announced at its next policy meeting in November.
The ECB is attempting to put pressure on governments to do more to support central bank. The ECB’s Jazbec reportedly said at a conference that central banks are asked to do more than is in their immediate mandates, adding that what the ECB is doing is trying to keep its head above water because of the lack of thorough policies needed to support it. At the same time fellow council member Costa said structural reforms are needed to boost growth.
Eurozone Sentix Investor Confidence fell to -13.7 in September from -9.8 in the previous month. The reading for the current situation dropped to -20.0 from -16.8 and the expectations reading fell to -7.3 from -2.5. Weak numbers that add to the increasingly gloomy outlook and together with the sharp correction in German manufacturing orders highlight the downside risks to the German growth outlook.
German manufacturing orders slumped 5.7% month over month in August, a much stronger than expected correction from the 4.9% month over month jump in July than expected. The drop left orders down 1.2% in the less volatile three months comparison, a sharp deterioration in the trend rate that will raise fresh fears of a fall back into recession in Germany and ultimately the Eurozone.
The EURUSD is oversold with a relative strength reading (RSI) of 28, which is below the oversold trigger level of 30. Support is seen near 1.205, while resistance is seen near the 10-day moving average at 1.2675.
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