Euro Rises as Christine Lagarde Follows in Mario Draghi Footsteps

The Swiss franc was unchanged as the Swiss National Bank (SNB) delivered its final interest rates decision of the year. The bank left rates unchanged at -0.75% as was widely expected. Officials also warned that the franc was still overvalued and that they were willing to intervene if necessary. The bank also expects inflation to fall from 0.4% in 2019 to 0.1% in 2020. It expects it to rise by 0.5% in 2020. In addition, the bank continued to warn that the ongoing trade war posed significant risks to the economy. It expects the economy to expand by 1% in 2019 and between 1.5% and 2.0% in 2020. 

Global stocks were mixed today as the market reacted to the Federal Reserve decision. The bank left interest rates unchanged between the range of 1.50% and 1.75% and warned that it may be forced to leave rates unchanged in the coming year. It also reiterated that it will continue to watch incoming data to see whether the economy will improve. Meanwhile, the market is still watching the ongoing stalemate on trade. Yesterday, it was reported that China and US negotiators were attempting to extend the tariff deadline. A statement from China’s commerce ministry said that the two sides were in close communication. There is also a possibility that Trump will impose tariffs on Chinese goods worth more than $160 billion on Sunday. In Europe, the DAX and Stoxx rose by 19 points and 4 points respectively. In Asia, the China A50 declined by 46 points while Nikkei and Hang Seng rose by 33 and 348 points respectively.

The euro rose slightly after the ECB delivered its interest rates decision. The bank left interest rates on the main refinancing operations and on marginal lending facility unchanged at 0.00% and 0.25%. The deposit facility rate was also left unchanged at -0.50%. The bank also said that it will leave rates at the current level until it saw significant movements on inflation. The rate of inflation has remained stubbornly below the 2% target. The bank also committed to continue the monthly €20 billion asset purchases that started on November 1. It said that these purchases would continue as long as necessary to boost growth in the region. This was the first rates decision by Lagarde. Meanwhile, in the United States, producer prices were unchanged in November. The PPI rose by an annualised rate of 1.1%, which was unchanged from the previous month.  Initial jobless claims rose by 252k while continuing jobless claims declined to 1.667k.

 

USD/CHF

The USD/CHF pair was relatively unchanged after the SNB rates decision. The pair is trading at 0.9827, which is close to the lowest level since September 4. The pair is slightly below the important support of 0.9840. It is also below the 14-day and 28-day moving averages on the eight-hour chart. The RSI has moved to the oversold level while the price is between the 50% and 61.8% Fibonacci Retracement. The pair may move lower to test the 61.8% Fibonacci Retracement level. 

 

UK100

UK stocks rose slightly as the country went to the polls. The UK100 index rose to a high of £7272.5, which was the highest level since December 3. The price is along the 38.2% Fibonacci Retracement level on the hourly chart. This price is also along the upper line of the Bollinger Bands while the RSI has been moving higher. The index could end the day at the current levels. However, it will likely see a significant action when the market opens tomorrow.

 

EUR/USD

The EUR/USD pair rose after the ECB decision and after the US PPI data. The pair reached a high of 1.1155, which was the highest level it has been since November 6. The price is slightly above the 14-day and 28-day moving averages. The price is also slightly below the important resistance of 1.1175. The RSI remains slightly below the overbought level of 70. The pair may continue to push higher to test the important resistance of 1.1175.