Technical Bias: Bearish
- EURUSD posts 100-pip rally following ECB meeting records.
- ECB policymakers are committed to QE, but some members are concerned that the Bank’s recent GDP and inflation forecasts are too optimistic.
- US jobless claims reached nearly 15-year low in week ended March 21.
The EURUSD rallied more than 100 pips on Thursday, as the European Central Bank reaffirmed its commitment to its recently-implemented quantitative easing program.
The EURUSD surged 110 pips to 1.0878. The pair was trading near session highs and is testing the 1.0885 resistance. On the downside, the EURUSD is likely supported at 1.0721.
The EURUSD is rallying after posting its biggest quarterly drop on record. The pair plummeted more than 11 percent in the first quarter.
The record of the March 5 European Central Bank Governing Council meetings was released on Thursday. The record showed a broad commitment to the ECB’s bond-buying program, which policymakers said would remain in place “for as long as needed.” The €60 billion monthly bond-buying program was announced in January and put into motion on March 9.
The Governing Could will remain firm and implement the quantitative easing measures “without hesitation” until the Bank’s long-term objectives were reached, the record revealed on Thursday.
Other members expressed concerns about the ECB’s revised forecasts, which were much more upbeat than expected.
“[The] pick-up in growth over the projection horizon depended on the assumptions of continued low oil prices and a further strengthening in foreign trade. In this regard, the argument was put forward that oil price developments might turn out to be stronger than currently assumed if global demand were to improve considerably. In addition, growth might also be constrained by structural bottlenecks in some countries,” the record showed.
Last month the ECB’s revised estimates showed GDP growth of 1.5 percent this year, 1.9 percent in 2016 and 2.1 percent in 2017. Inflation was forecast to remain flat this year before reaching 1.5 percent in 2016 and 1.8 percent in 2017.
In the United States, the attention shifted to employment data ahead of Friday’s nonfarm payrolls report. On Thursday the Labor Department said initial jobless claims fell to a nearly 15-year low last week, adding further evidence of a strengthening labour market. Initial jobless claims declined by 20,000 to a seasonally-adjusted 268,000. That was the lowest level since the spring of 2000.