The Euro came crashing down against all major currencies after the European Central Bank’s rate decision and press conference. The Euro saw its largest decline against the Japanese Yen, which is fully correcting the previous week’s collapse. European indices such as the DAX and CAC also declined after the announcement. The President of the European regulator confirmed that this would not be the last interest rate hike. Still, the increase was relatively low, and the ECB’s Rate is significantly lower than its competitors.
US stocks saw a similar price movement and declined for a fifth consecutive day. The Dow Jones was the worst-performing US-based index, while the NASDAQ only saw a minor decline after an attempted correction. The stock market was positively influenced after the market closed by Apple’s latest earnings report, which showed better-than-expected figures. However, during this earnings season, it has been a reoccurring scenario to see positive earnings but a declining index.
Gold, on the other hand, continues to maintain a price above $2,000. The price in the early hours of yesterday declined back to the previous price gap, but then climbed back up as US investors entered the market. Other commodities such as crude oil and natural gas continue to decline as investors as demand declines and the risks of a recession edge higher.
EUR/USD - Euro Crashes as ECB Hikes Rates
The Euro declined against the Dollar throughout most of yesterday’s three trading sessions. The price regained 33% of the previous loss after the ECB’s press conference. However, the bullish price movement formed nothing more than a retracement. This morning the exchange rate slightly rose by 0.21% but continues to show signs of bearish price movement.
Positives and negatives can be taken from the ECB’s latest press conference. The positives are mainly related to the President’s comments on more interest rates to come. Mrs. Lagarde was clear to the press that the lower interest rate hike does not indicate that the ECB will take a dovish tone. However, economists were not so convinced, considering the ECB President advised interest rates are already in the restrictive range. For this reason, many economists believe the regulator will only hike one last time. Previously, experts were expecting the ECB to keep to a 50 basis point hike, considering the main refinancing rate is significantly lower than their main competitors.
The US dollar price is likely to depend on the employment figures, which will be made public this afternoon. The US Dollar Index this morning is declining, though traders should note that the Dollar has the tendency to decline during the Asian and early European session. Investors will largely be focusing on the Dollar performance 1–2 hours before the start of US trading. Markets expect the US Unemployment Rate to rise slightly to 3.6% and the NFP figure to decline to 182,000. This would be the lowest NFP figure since 2021. If the data comes in higher than what investors were expecting, the Dollar may indeed find some strength. Nonetheless, it is still vital for traders to analyse the price movement.
To obtain a clearer signal, investors will be looking for the price to break above 1.10475 or break below 1.10069.
NASDAQ - NFP in Focus after Apple’s Earnings Report
The NASDAQ has formed three bearish impulse waves, each high trading at a lower price. The formation is known by most wave theories to indicate a downward trend. However, most trends form 4 impulse waves. For this reason, investors will also be slightly cautious that the price may still increase, considering the latest positive earnings report. The banking liquidity crisis has mainly pressured the price over the past week, the low investor sentiment and the restrictive monetary policy. The Federal Reserve has advised they are not likely to hike again in the next three months. However, a lower interest rate is out of the question.
The latest earnings report came from Apple, NASDAQ’s second most influential stock after Microsoft. Apple saw better figures than Wall Street analysts were expecting. The Earnings Per Share read more than 6% higher than expected. Analysts were expecting Revenue to show a maximum of $93 billion, but came in 2% higher. The better-than-expected quarter was mainly due to iPhone sales. The Mac, on the other hand, is slightly underachieved.
Summary:
- Mrs. Lagarde was clear to the press that the lower interest rate hike does not indicate that the ECB will take a dovish tone.
- Also, Mrs. Lagarde advises that monetary policy is already in restrictive territory.
- Apple saw better figures than Wall Street analysts were expecting. The Earnings Per Share read more than 6% higher, while revenue was more than 2% higher.
- Global equities indices decline for the fifth consecutive day.
