The European currency fell against the US dollar after the press conference of the President of the European Central Bank, Mario Draghi, at which the policy was revised to a softer side, which, of course, did not please buyers of risky assets, putting on an increase in interest rates in the middle of this year.
Yesterday, it became known that the European Central Bank left the refinancing rate unchanged, at the level of 0.0%. The deposit rate also remained at the same negative level, -0.40%.
The ECB expects rates to remain at current levels for at least this summer inclusive. The European regulator also assured that it would completely reinvest the profits from QE over a long period after the first rate increase, which again upset traders who are putting more of a more aggressive monetary policy tightening.
Mario Draghi
The President of the ECB said that the growth momentum in the short term is likely to be weaker than expected, and the balance of risks for the growth prospects of the eurozone economy is shifted to the downside. The uncertainty of outcome Brexit makes an even greater contribution to the growth of uncertainty.
According to Draghi, general inflation is likely to fall in the coming months, while core inflation, in general, will remain restrained.
The head of the ECB also noted that if the uncertainty persists, the current monetary policy will remain softer for a long time. A key aspect that needs to be assessed is the duration of the overall uncertainty. Draghi is also confident that, if necessary, the ECB uses all the tools to stimulate economic growth in the region.
New discussions related to monetary policy will now take place only in March of this year. Predictably, then it will be given and new forecasts concerning interest rates.
USA
Data released yesterday on the US labor market supported the dollar. According to a report by the US Department of Labor, the number of initial claims for unemployment benefits fell by 13,000 in the week from January 13 to 19, to 199,000. Economists expected the number of applications last week to be 218,000.
The indicator of manufacturing activity in the US private sector rose in January, which also supported the US dollar. Growth was due to production, while activity in the services sector slowed slightly.
According to HIS Markit, the preliminary purchasing managers index for the manufacturing sector in January rose to 54.9 points from 53.8 points in December, while the service sector index fell to 54.2 points from 54.4 points in December. Let me remind you that the index values above 50 indicate an increase in activity.
As for the current technical picture of the EUR / USD pair, a breakthrough in the intermediate support of 1.1305, above which trade is currently conducted, will lead to the formation of the next wave of the trading instrument's decline with the renewal of the annual minima in the 1.1270 and 1.1220 regions. The upward correction will be limited by the resistance of 1.1340, and the larger sellers will show themselves immediately after the test of the area of 1.1360.
The material has been provided by InstaForex Company - www.instaforex.com