MARKET BRIEFING – LONDON OPEN 04.11.2015
Yesterday in Frankfurt during an event that celebrated the European Cultural Day, the European Central Bank President, Mr. Mario Draghi gave the clearest indication yet that he and his colleagues on the Governing Council could launch an expanded stimulus programme as early as next month.
ECB President Draghi told reporters “Even though domestic demand remains resilient, concerns over growth prospects in emerging markets and other external factors are creating downside risks to the outlook for growth and inflation.”
Draghi went on to add “In this context, the degree of monetary policy accommodation will need to be re-examined at the Governing Council’s December meeting.”
“The Governing Council is willing and able to act by using all the instruments available within its mandate if warranted in order to maintain an appropriate degree of monetary accommodation.”
His comments at what was meant to be a fairly low-key event is a clear sign that the European Central Bank is going to act in December.
The question of timing is of course as always key. As had happened in September, the next key meeting for the ECB will take place before the United States Federal Reserve announces their next move.
With the possibility of the FOMC deciding in increased rates in December, is it really necessary for the ECB to act so soon?
If the Fed hikes, this will be a stimulus in itself and have a greater effect than the ECB expanding its own QE programme.
However, Mario Draghi does not have the luxury that allows him to second guess the outcome of the FOMC meeting. The ECB may, therefore, move anyway and increase stimulus independently of any FOMC decision.
The ECB indicated that they have many options to explore and implement.
These include:
A cut in the deposit rate.
A faster pace of asset purchases.
Expand what can be purchased.
All these measures will, of course, have the effect of weakening the euro which will help support growth by expanding exports. Furthermore, the cheaper Euro will also act as a tool that increases inflation through imports.
EURUSD
The intraday technical outlook
Trend 1 hour: Down
Target 1: 1.1045
Target 2: 1.0865
Projected range in ATR’s: 0.0094
Daily control level: 1.0500
GBPUSD
The intraday technical outlook
Trend 1 hour: Down
Target 1: 1.5500
Target 2: 1.5335
Projected range in ATR’s: 0.0086
Daily control level: 1.5445
USDJPY
The intraday technical outlook
Trend 1 hour: Up
Target 1: 121.80
Target 2: 120.30
Projected range in ATR’s: 0.79
Daily control level: 120.60
USDCHF
The intraday technical outlook
Trend 1 hour: Up
Target 1: 0.9950
Target 2: 0.9850
Projected range in ATR’s: 0.0079
Daily control level: 0.9835
USDCAD
The intraday technical outlook
Trend 1 hour: Down
Target 1: 1.3170
Target 2: 1.2950
Projected range in ATR’s: 0.0111
Daily control level: 1.3165
AUDUSD
The intraday technical outlook
Trend 1 hour: Up
Target 1: 0.7255
Target 2: 0.7115
Projected range in ATR’s: 0.0073
Daily control level: 0.7110
GOLD
The intraday technical outlook
Trend 1 hour: Down
Target 1: 1131.00
Target 2: 1103.00
Projected range in ATR’s: 13.78
Daily control level: 1138.55
OIL
The intraday technical outlook
Trend 1 hour: Up
Target 1: 49.75
Target 2: 46.80
Projected range in ATR’s: 1.47
Daily control level: 46.65
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