ECB Stands Pat as Widely Expected, Confident Draghi Shoots Up Euro

Quick updates: Euro surges as being boosted by ECB President Mario Draghi’s comment. In his remarks, Draghi said that "incoming information confirms a robust pace of economic expansion, which accelerated more than expected in the second half of 2017." And, "the strong cyclical momentum, the ongoing reduction of economic slack and increasing capacity utilisation strengthen further our confidence that inflation will converge towards our inflation aim of below, but close to, 2%".

Euro remains steady in range after ECB delivers no surprise to the markets. ECB left monetary policies unchanged as widely expected. The main refinancing rate is held at 0.00%, marginal lending facility rate and deposit facility rate at 0.25% and -0.40% respectively. Regarding the EUR 30b per month asset purchase program, the Governing Council confirms that it’s intended to "run until the end of September 2018, or beyond, if necessary". Also, that will be "until the Governing Council sees a sustained adjustment in the path of inflation consistent with its inflation aim." ECB also left the door open to "increase the asset purchase programme (APP) in terms of size and/or duration" if "outlook becomes less favorable".

German Ifo business climate hit record high

German Ifo business climate rose to 117.6 in January, up from 117.2 and beat expectation of 117.0. That’s also the highest reading on record, same as that in last November. Expectations gauge dropped to 108.4, down from 109.4, below consensus of 109.2. Current assessment gauge rose to 127.7, up from 125.5, above consensus of 125.3. Ifo President Clemens Fuest noted in the release that "the German economy made a dynamic start to the year." The expectations gauge did slip. But Fuest said "fewer manufacturers expect to see any further short-term improvement in their very good business situation".

IMF Lagarde urged Mnuchin to clarify his stance on Dollar

IMF managing director Christine Lagarde said that the world economy is at a sweet spot and international trade is growing even faster than economic growth. Meanwhile, she also urged US Treasury Secretary Steven Mnuchin to "clarify exactly what he said" regarding Dollar’s exchange rate. She emphasized "the dollar is of all currencies a floating currency and one where value is determined by markets and geared by the fundamentals of US policy."

Mnuchin said his comments were "balanced and consistent".

Dollar’s selloff accelerated yesterday after Mnuchin said that a weak dollar is "good for us as it relates to trade and opportunities". He defended that the comments was " balanced and consistent" and, he’s "not concerned with where the dollar is in the short term". He further clarified today that it’s "perhaps slightly different from previous treasury secretaries" but "it’s not a shift in my position". He emphasized that "we do support free and floating currencies reflective of the market". He claimed that "we’re not looking to get into trade wars".

EUR/USD Mid-Day Outlook (Update)

Daily Pivots: (S1) 1.2326; (P) 1.2370 (R1) 1.2452; More….

EUR/USD picks up upside momentum again as lifted by ECB Draghi. key fibonacci cluster level at 1.2494/2516 is already met but there is no sign of topping yet. Intraday bias stays on the upside. Sustained break of 1.2494.2516 will target 100% projection of 1.0569 to 1.2091 from 1.1553 at 1.3075 next. On the downside, below 1.2388 minor support will turn intraday bias neutral first.

In the bigger picture, rise from 1.0339 medium term bottom is still seen as a corrective move for the moment. But key fibonacci level at 38.2% retracement of 1.6039 (2008 high) to 1.0339 (2017 low) at 1.2516 is looking vulnerable. Sustained break of 1.2516 will carry larger bullish implication and target 61.8% retracement of 1.6039 to 1.0339 at 1.3862. Nonetheless, rejection from 1.2516 will maintain long term bearish outlook and keep the case for retesting 1.0039 alive.

Economic Indicators Update