US markets finished slightly lower but well off their lows last night as the latest FOMC minutes confirmed the view that the recent decision to taper last month was very much a majority view
, a view that has subsequently been endorsed, earlier this week, by the lone dissenter at the time, Boston Fed chief Rosengren.
The minutes also expressed optimism that the current improvement in the labour market looked set to continue
as the economy improved, but this was tempered with some caution about the weak inflation outlook, which could well influence future decisions about tapering too quickly, in the coming months.
Though the minutes emphasised that the pace of asset purchases was not on a preset course
the improvement in the ADP payrolls yesterday has raised expectations of further tapering measures in the short term, which could well increase if Friday’s payrolls are as equally good.
While last nights Fed minutes failed to provide any surprises
events here in Europe are set to be focussed on the latest ECB rate decision.
Given that we’ve seen a fairly weak EU flash CPI number for December this week
, we’ve had the inevitable speculation that we could well see another rate cut due to concerns about the prospects of deflation in the euro area. The main concern has been surrounding the particularly weak reading on the core measure which hit a record low of 0.7%
That said given how robust a lot of the other economic data has been this week, poor unemployment data notwithstanding, any move on rates is likely to be too soon for this month’s meeting,
given ECB President Mario Draghi’s comments at the end of last year to German magazine Spiegel.
While his comments were undoubtedly cautious, the tone of his remarks suggested that while the euro crisis was by no means over, he saw no signs of deflation and no urgent need to cut rates further, in an attempt to play down German concerns about the current looseness of ECB policy.
It would therefore be a surprise to see any move on rates today,
but that won’t mean that his press conference won’t hint at the availability of other “powerful tools” in the central banks arsenal, and that is inevitably where markets will focus their attention today, in particular about the likelihood of measures to help increase lending to businesses, which has continued to decline over the past few months.
is also likely to continue to peddle the well-worn line that governments must continue to act on reform programs
and he may refer to additional tools but it would be a surprise if he went into specifics.
The Bank of England is also set to meet
but no changes are expected here, while the latest UK trade balance numbers for November are expected to show a slight reduction in the deficit from £9.7bn to £9.4bn.
– despite sliding below 1.3570 we found just above the 100 day MA at 1.3550 and as such despite yesterday’s dip you would have to conclude the current uptrend from the lows at 1.2760 remains intact. A move below the trend line support has the potential to open up further losses towards 1.3475. Only a break below the 1.3475 level would then argue for a move to the lows in November at 1.3300 and 200 day MA.
The key resistance remains at 1.3885, which is long term trend line resistance from the all-time highs at 1.6040.
– the pound continues to look well supported with resistance at 1.6480 while on the downside we find key support lies at 1.6320 trend line support from the 1.4815 lows in July. Only a break below 1.6250 retargets a move back towards 1.6110. While above this key support level the potential for rebounds back to 1.6520, and the highs last week remains, however last weeks daily bearish engulfing candle does raise the risk of a slide back towards the 1.6000 level.
– continues to look weak breaking below the December lows at 0.8252 and making 11 month lows at 0.8242, the risk remains for a move towards the 0.8160/70 area which is a 61.8% retracement of the entire up move from the 2012 lows at 0.7755 to the highs last year at 0.8815. Only a move above 0.8330 delays the prospects of a weaker euro.
– the US dollar continues to look a little soft and is currently struggling to move back above the 105.00 area. The Ichimoku cloud support on the four hour chart is still acting as support but the risk appears to be shifting towards a possible drift lower. Momentum does seem be stalling and a fall below cloud support could bring about a move towards 103.70 on a break below, currently at 104.60.
The 105.50 area the 61.8% retracement of the entire down move from the 2007 highs at 124.20 to the all-time lows in 2011 at 75.25 remains a key obstacle to further gains.
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