The European Central Bank headed by Mario Draghi announced on Thursday that based on the recent policy meeting, the governing council reached a consensus to slash the main refinancing rate to a record-low 0.50 percent from 0.75 percent. Without mentioning names, Draghi hinted there was a three-way split within the council between members who wanted a 25 or 50 basis point cut, and those who desire no change. The record-low rate has been decided as the 17-nation Eurozone remains mired in recession.
In the United States, Bureau of Labor Statistics reported another healthy gain in the latest Non-Farm Employment Change data. The data advanced for the third consecutive month, this time with a gain of 165,000. Median forecast was just 146,000. Unemployment rate has eased to 7.5 percent. On the other hand, Chicago Purchasing Managers’ Index slid below the 50-mark for the first time in 6 months, falling to 49.0 which is the lowest reading since September 2009’s 46.1.
Gold carried on with its recovery from its two-week tumble, but spent most of the time consolidating before making a minor high on Friday this week. Now, price is just $8 away from full recovery of the April 15 mad slide to the low-$1,300s, and the hesitation to break this area is understandable. A very tough road ahead remains: resistances come in at $1,500, $1,550, and the $1,600-20 area.
Oil fared better than Gold as the former printed its second consecutive bullish weekly close while reaching as high as $96. This comes after oil slid to an $85.91 low three weeks ago. Bulls are in for tougher battles as they still have a lot of wood to chop above $97. Weekly bearish defenses are scattered between $97 and $98.
EURUSD succeeded in reaching a new high for the last 8 weeks but the gains were pulverized after the ECB announced its interest rate cut on Thursday. Eventually, the pair closed the week at 1.3110 after sliding to a week’s low of 1.3032. Bulls can still take advantage of momentum if they can conquer 1.3200 before the coming mid-week, ahead of the stubborn 1.3300 level.
After tumbling and a failed attempt to reach 100 during the prior week, USDJPY has regained composure and made a substantial recovery in this weeks’ trading. From 97.00, the pair has advanced to a weekly high of 99.25 before settling below 99.00 at the week’s close. The question now is: will USDJPY bulls be able to conquer 100 this time around?
GBPUSD traded higher in a timid 140-pip weekly range, following the prior week’s impressive 300-pip advance. The 120-pip whipsaw during Friday’s US Jobs data release undeniably messed things up for this pair and other majors, but GBPUSD emerged relatively unscathed. The pair remains on track to climb towards 1.5800 where potential resistances could spoil further gains.
The Week Ahead
On Monday, Japan observes Children’s Day, while the UK observes May Day. Important news releases are Australia ANZ Job Advertisements, Retail Sales; Spain’s Unemployment Change; Italy and Spain Services PMI; UK Halifax HPI; Eurozone Retail Sales; Canada’s Ivey PMI and Building Permits. ECB’s Draghi is set to give a speech this day.
Tuesday starts off early with the quarterly data of New Zealand’s Labor Cost Index; Australia’s Trade Balance and Interest Rate Statement plus Announcement; Switzerland’s SECO Consumer Climate and Foreign Currency Reserves; France Trade Balance and Industrial Production; Germany’s Factory Orders. US Treasury Secretary Lew will give his speech in Cleveland.
Wednesday is off to another early start with New Zealand’s release of RBNZ Financial Stability Report; UK’s BRC Retail Sales Monitor; China’s Trade Balance; Switzerland’s CPI; Germany’s Industrial Production. FOMC Member Stein is slated to give a speech later this day.
Thursday is yet another exciting day as Bank of England announces its Interest Rate along with its Rate Statement and Asset Purchase Facility. Other news for this day include Australia and New Zealand Employment data; China CPI and PPI; ECB Monthly Bulletin; US Unemployment Claims.
Lastly on Friday, Japan publishes the Current Account data, plus other key economic releases include RBA’s Monetary Policy Statement; UK Trade Balance; G7 Meetings; Canada’s Employment data; and speeches from Fed’s Evans and Bernanke.