EURUSD hovers around 1.14 as the ECB stay the course

Summary:

ECB release minutes from October meeting
“Incoming data still consistent with broad-based growth expansion”
Single currency a little higher on the day; EURUSD hovering around 1.14

The release of the minutes from last month’s ECB monetary policy meeting has delivered no great surprises with the central bank seemingly looking to remain on their present course without any great deviations. The key takeaways from the minutes can be summarised by the following quotes:

Policymakers generally agreed that data was weaker than expected
Remains in line with expansion and gradually rising inflationary pressures
Policy remains on steady track in line with market expectations
Trade tensions may be offset by higher US imports
Acknowledged uncertainties and fragilities of outlook with regards to trade
A remark was made that number of arguments pointed towards risks to growth tilting to the downside

Summarising these remarks there’s not a lot to go on, with the bank perhaps shifting ever so slightly to the dovish side but that is really trying to make something of it. “A number of arguments pointed towards risk to growth tilting to the downside” is more cautious than saying risks are “broadly balanced” but before reading too much into it the other comments suggest that on the whole the bank are unlikely to shift their policy stance anytime soon.

EURUSD has been trending higher in the past week or so but still remains below the 1.1470-1.1500 region. Source: xStation

In recent months the ECB have become far more efficient at broadcasting policy changes meaning that rate decisions have, the majority of the time, been pretty much duds. With the APP still expected to end next month the key area to watch going forward is how quickly the bank are willing to raise their rates, with the overnight deposit rate still at -0.4%. European shares have been suffering of late with the EU50 falling 17% from the highs seen last year and clearly trending lower throughout this time. Recent lows around 3090 may provide a possible double bottom and yesterday’s price action is encouraging, with buyers stepping in around this level. Should this hold then a recovery back towards 3270 is possible but a break below would leave the market on the precipice of falling into bear market territory.

The EU50 is back near its recent lows of 3092, but a bounce yesterday along with some positive divergence in the RSI could be seen as suggesting a possible double bottom may be forming. Source: xStation

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