Euro retreats after ECB hike, dollar recovers after GDP
The Euro softened significantly today after the ECB announced a widely expected 75 basis point rate hike. President Christine Lagarde has delivered no particularly hawkish message that could give the euro a boost. On the other hand, the dollar is recovering, with the help of better than expected GDP data. But the greenback remains the worst performer followed by the Canadian franc and the Swiss franc. Sterling is the leader.
Technically, EUR/CHF’s pullback now suggests that a temporary top is in place at 0.9953, just ahead of parity. Some consolidations could be observed. But further upside will remain in favor as long as 0.9798 resistance turns support. The upside from 0.9407 is likely to pick up again at a later stage.
In Europe, at the time of writing, the FTSE is up 0.17%. The DAX is up 0.05%. The CAC is down -0.30%. Germany’s 10-year yield is down -0.102 at 2.014. Earlier in Asia, the Nikkei fell -0.32%. Hong Kong’s HSI index rose 0.72%. China Shanghai SSE fell -0.55%. The Singapore Strait rose 0.23%. Japan’s 10-year JGB yield fell from -0.0055 to 0.253.
The ECB raises 75 basis points and recalibrates the TLTRO III
The ECB raises interest rates by 75 basis points as widely expected. The main refinancing, marginal lending and deposit rates are 2.00%, 2.25% and 1.50% respectively, effective November 2. the timely return of inflation to its medium-term inflation target of 2%. »
The future path of policy rates will be based on “the changing outlook for inflation and the economy” and will follow its “meeting-by-meeting approach”.
In addition, the terms and conditions of the TLTRO III refinancing operations are modified and “recalibrated” to ensure consistency with the broader monetary policy normalization process.
US GDP grew 2.6% annualized in the third quarter, slightly above expectations
US GDP grew at an annualized rate of 2.6% in the third quarter, above expectations of 2.4%. Growth in the PCE price index slowed from 9.0% to 4.1%, below expectations of 5.4%.
The BEA noted that the increase in real GDP reflected increases in exports, consumer spending, non-residential fixed investment, federal government spending, and state and local government spending, which were partly offset by decreases in fixed residential investment and private investment in inventories. Imports, which are a subtraction in the calculation of GDP, have declined.
Also released, durable goods orders rose 0.4% m/m in September, below expectations of 0.5% m/m. Non-transportation order fell -0.5% m/m, worse than expected by 0.0% m/m. Initial jobless claims rose by 3,000 to 217,000 in the week ending October 21.
German consumer sentiment Gfk rose to -41.9, too early to start trend change
Germany Gfk consumer sentiment for November improved from -42.8 to -41.9, slightly below expectations of -41.8. In October, economic expectations fell from -21.9 to -22.2. Income expectations fell from -67.7 to -60.5. The propensity to buy also fell from -19.5 to -17.5.
“It is certainly too early to speak of a change in trend at present. The situation remains very tense for consumer sentiment,” says Rolf Bürkl, consumer expert at GfK. “Inflation has recently reached 10% in Germany, and concerns about the security of energy supplies continue to grow. It therefore remains to be seen whether the current stabilization will last or whether, given the coming winter, there is reason to fear a further worsening of the situation.
EUR/USD mid-day outlook
Daily pivots: (S1) 0.9989; (P) 1.0039; (R1) 1.0134; After…
EUR/USD retreated after hitting 1.0092 and the intraday bias initially turned neutral. Overall, the rise from 0.9534 is likely to continue until the 4:55 EMA (now at 0.9885). Above 1.0092 the rally will resume from 0.9534 to a 38.2% retracement from 1.1494 to 0.9534 at 1.0283.
Overall, the case for a medium-term bottom at 0.9534 is building up, with a bullish convergence condition in the daily MACD. Although it’s too early to call for a trend reversal, the firm break of 0.9998 opens a stronger rebound towards the 55-week EMA (now at 1.0630), even as a corrective upside. This will now be the preferred case as long as the 55-day EMA (now at 0.9937) holds.
Economic Indicators Update
|00:30||USD||T/T T3 import price index||3.00%||0.80%||4.30%|
|06:00||USD||Germany Gfk Consumer Confidence Nov||-41.9||-41.8||-42.5||-42.8|
|12:15||USD||ECB main refinancing rate||2.00%||2.00%||1.25%|
|12:30||USD||Initial unemployment insurance claims (October 21)||217K||225K||214K|
|12:30||USD||Q3 P annualized GDP||2.60%||2.40%||-0.60%|
|12:30||USD||GDP price index Q3 P||4.10%||5.40%||9.10%||9.00%|
|12:30||USD||Durable Goods Orders Sept.||0.40%||0.50%||-0.20%||0.30%|
|12:30||USD||Durable goods orders excluding transportation Sept.||-0.50%||0.00%||0.20%|
|12:45||USD||ECB press conference|
|2:30 p.m.||USD||Natural gas storage||111B|