MARKET DEVELOPMENTS – ECB REPEATS PLEDGE TO END QE THIS YEAR
US equity futures are mixed with the Nasdaq 100 the clear underperformer after the Facebook shares plunged as much as 20% following a surprisingly dissappointing earnings report.
USD:The USD has caught a broad bid, which in turn has pressured its major counterparts with GBP and EURfirmly below 1.32 and 1.17 respectively. Alongside this, continued widening in German-US bond spreads continue to point towards further weakness in EURUSD. In terms of recent data, US trade deficit ballooned yet again to $68.3bln from $64.8bln, while jobless claims data continued to suggest that the US labour market remains robust.
EUR: Unsurprisingly, the ECB stood pat on monetary policy, while guidance from the ECB was also left unchanged with the central bank stating that “QE purchases will finish at the end of the year, subject to incoming data confirming medium term inflation outlook”, while “rates are expected to remain at current levels at least through summer of 2019”. As such, little reaction had been seen in EURUSD.
Crude Oil: Brent and WTI crude futures are slightly firmer amid reports that Saudi Arabia had warned that it is halting temporarily all oil shipments through the Red Sea shipping lane of Bab al-Mandeb after an attack on two large oil tankers by Houthi rebel. Alongside this, tensions remain high between Iran and US with Iran hinting at disrupting oil flow through the Strait of Hormuz.
DailyFX Economic Calendar: Thursday, July 26, 2018 – North American Releases
IG Client Sentiment Index: EURUSD Chart of the Day
EURUSD: Data shows 52.0% of traders are net-long with the ratio of traders long to short at 1.08 to 1. The number of traders net-long is 1.2% lower than yesterday and 8.7% lower from last week, while the number of traders net-short is 2.6% higher than yesterday and 14.6% higher from last week.
We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests EURUSD prices may continue to fall. Yet traders are less net-long than yesterday and compared with last week. Recent changes in sentiment warn that the current EURUSD price trend may soon reverse higher despite the fact traders remain net-long.
--- Written by Justin McQueen, Market Analyst
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