Analysis and Opinion »

Draghi Comments Trump Weak Sentiment

David Becker
Share on StockTwits
Published on
www.iforex.com
Draghi Comments Trump Weak Sentiment

The Euro move higher on Monday, despite weaker than expected sentiment, as traders prepare for a plethora of data that will drive the currency markets during the balance of the week. Perhaps the most important event Monday was Draghi’s comments to the German parliament. He indicated that although QE was under consideration it was not imminent and relatively unlikely.

Eurozone ESI economic confidence unexpectedly dropped to 102.0 from 102.5 in March. Expectations had been for a renewed acceleration after the improvement in preliminary consumer confidence as well as better than expected IFO and PMI readings.

German state inflation picked up in April. Saxony, Brandenburg, Hesse and Rhineland Palatinate reported acceleration to 1.3% year over year, inflation in BDW reached 1.4% year over year, while Bavaria reported only a marginal rise to 1.0% year over year from 0.9% year over year and NRW a rise to 1.7 %year over year from 1.4% year over year.

Eurozone M3 money supply growth unexpectedly dropped to 1.1% year over year from 1.3% year over year in the previous month, against expectations for a pickup in the annual rate. M3 is a gauge of the velocity of money and the decline shows that inflation is subdued. The three months moving average, the ECB’s preferred target remained steady at 1.2% year over year. The growth rate of loans to the private sector remained steady at -2.2% year over year.

The EURUSD tested trend line resistance before falling back. The consolidation in the exchange rate has placed support near both the 10-day moving average and an upward sloping trend line near 1.3825. Momentum has turned positive as the MACD (moving average convergence divergence) index generating a buy signal. This occurs as the spread (the 12-day moving average minus the 26-day moving average) crosses above the 9-day moving average of the spread.

Share on StockTwits