Today’s article will feature two primary pieces of content: a look at the EUR-USD‘s price action and a summary of what the European Central Bank (ECB) and Federal Reserve’s talking heads have discussed today.
A Rough 2024 for EUR-USD
It’s been a rough 2024 so far for EUR-USD. Over the last 15 weeks, it has fallen -378 pips (-3.43%). And last week’s performance of almost -200 pips (-1.98%) was the worst week since the beginning of February 2023.
From a daily technical analysis perspective, bulls may see some reprieve from the steep drop over the past few weeks. There are substantial gaps between the bodies of the daily candlesticks and the Tenkan-Sen within the Ichimoku Kinko Hyo system, indicating very oversold conditions.
The Composite Index and Detrended Price Oscillator levels complement the Ichimoku analysis – both sitting at or near their extreme historical support levels.
ECB and Fed Takeaways
Luis de Guindos, ECB Vice President:
- Policy Adjustment Signal: Indicates potential easing if inflation targets are reliably met.
- Key Quote: “If our assessment supports sustained inflation convergence to our target, a policy relaxation would be appropriate.”
Klaas Knot, ECB Governing Council Member:
- Rate Cut Forecast: Projects a cautious rate cut in June, optimistic about the disinflationary process.
- Market Reaction: Traders are pricing in the anticipated rate cuts, which is being reflected in EUR-USD movements.
Olli Rehn, ECB Governing Council Member:
- Inflation Outlook: Reports progress towards the ECB’s 2% inflation target, hinting at a possible easing of monetary restraint.
- Policy Implication: Suggests a near-term policy shift if positive trends continue without geopolitical or energy price setbacks.
John Williams, NY Fed President:
- Hawkish Outlook: Does not dismiss further rate hikes if deemed necessary, influencing USD strength.
- Market Impact: USD gains as traders speculate on the continued robustness of Fed policies.
Key Economic Data Releases
Eurozone Economic Indicators:
- February Current Account: The account recorded a surplus of €29.5 billion, though down from €39.4 billion. This reflects mixed dynamics, with surpluses in goods (€34 billion) and services (€7 billion) and deficits in secondary (€9 billion) and primary incomes (€2 billion).
- Implication: Shows strength in trade and services but challenges in income transfers.
U.S. Economic Health Check:
- Initial and Continuing Jobless Claims: Initial claims were slightly better than expected at 212K versus an estimate of 215K, and continuing claims were nearly steady.
- Labor Market Stability: Indicates ongoing resilience in the U.S. job market, supporting USD stability.
- Philly Fed Manufacturing Index: Jumped to a two-year high of +15.5, surpassing expectations and signaling a strong rebound in manufacturing activities.
- Economic Momentum: Reflects potential inflationary pressure in production costs but also a robust industrial sector.
- Existing Home Sales: Slightly missed expectations at 4.19 million versus 4.20 million forecasted, with a year-over-year price increase of 4.8%.
- Housing Market Insights: Suggests a cooling yet price-rising market, complicating the Fed’s inflation management strategy.
