EUROPEAN session review: ECB may cut rates in April

Data released: 

09:00 GMT EMU ECB Monthly Report 

The euro advanced to the highest level versus the dollar in more than two years as policy makers signal support for the region’s recovery. 

However, TCB members noted that it’s too early to forget about rate cut possibility if inflationary pressure will decrease. Ironically, the stronger the euro, the more likely the ECB will ease policy next month. 

EURO 

ECB official Klaus Knot said that rate cut remains an option if CPI falls; 

- talks negative rates but hold the QE; 

- Unlikely unconventional policy will be needed as financial stability returns 

- Negative deposit facility should not be excluded 

- Inflationary risks are currently very limited 

EUR/USD rallied to $1.3960 and remains higher. Above resistance is around $1.3960. Initial support comes at $1.3835 (Tuesday’s lows), then - at $1.3800, below - at $1.3785 (61.8% Fibo of recent rise). 

POUND 

The sterling is pushing higher on Thursday. Next on tap in the UK economy will be tomorrow’s trade results, although market participants would keep an eye on today’s US retail sales (0.2% exp. headline) and Initial Claims (330K exp.) on the USD side of the equation. 

GBP/USD tested $1.6680 before retreated. Below $1.6600 losses may widen to $1.6565 and $1.6450 (trendline support). Back above $1.6700 targets $1.6785 (Friday’s highs) and $1.6820 (Feb 17 highs). 

YEN 

The yen rose amid general dollar’s weakness. 

USD/JPY holds a bit higher Y102.10/00 (Mar 5 hourly lows). Below support comes at Y101.20 (Mar 3 lows). Initial resistance comes at Y102.85 (Asian highs), then - at Y103.40 (Mar 11 highs) and Y103.75 (Mar 7 highs).

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