The Euro zone's bond markets tumbled shortly, while the Euro moved markedly higher after the European Central Bank signalled on Thursday that it would begin to cut back the stimulus program starting from April 2017. The ECB said it would lower its 80 billion euros monthly asset purchases to 60 million euros but prolong the QE asset buys until December next year., pointing to low inflation that, according to the latest forecasts, was projected to achieve only 1.7% in 2019. In the meantime, market analysts expected the Central bank to leave its asset purchases at the current levels for 6 more months. The Bank bought 1.4 billion euros in bonds since the start of the QE program. The ECB kept its inflation forecast unchanged at 0.2% for 2016 but revised it slightly up to 1.3% and 1.5% for 2017 and 2018, respectively. The Bank also left its benchmark and deposit rate at 0.0% and –0.4% , respectively, in line with economists' expectations. Overall, the Euro zone's recovery remained solid despite Britain's decision to leave the European Union and Donald Trump's surprise victory in the US presidential elections. After the announcement, the Euro initially jumped to 1.0875 against the US Dollar but failed to hold the momentum, falling back to 1.0753.
The number of Americans filing for unemployment benefits dropped from five-week highs last week, official figures revealed on Thursday. According to the US Department of Labor, initial jobless claims fell to 258,000 in the week ending December 2 after rising to 268,000 in the preceding week. That was in line with analysts' projections. Initial claims remained below the 300,000 level for the 92nd straight week, the longest streak since 1973. Meanwhile, the four-week moving average of claims, which is considered a better measure of labor market trends, advanced 1,000 to 252,500 in the reported period. Many economists believe the US economy is at or near full employment, with the unemployment rate at 4.6%. Thursday's report also showed that the number of so-called continuing claims decreased 79,000 to 2.01 million during the week ended November 26, while their four-week moving average dropped 9,5000 to 2.03 million. The Federal Reserve is widely expected to raise its key interest rate by 25 basis points at its two-day policy meeting next week. The last time the Fed increased its benchmark overnight rate was in December last year, when the rate was increased from 0.25% to 0.5%. After the release, the US Dollar rose against other major currencies.
Upcoming fundamentals: US Preliminary UoM Consumer Sentiment
The US Preliminary UoM Consumer Sentiment will be the single fundamental market mover on Friday, and could add some volatility at 15:00 GMT. Some low impact gauges could cause a surprise, but are unlikely to move the markets significantly.
EUR/USD calms after volatile Thursday session
Daily Chart: After posting a 2.5% red candle on Thursday, EUR/USD opened non-volatile and slightly reddish. The pair dived right through the channel up on the hourly chart and appears to be unwilling to attempt a re-entry. The pair is, however, still inside of the senior two-month channel and a bearish market would be in line with the channel expectations of a wave south. Immediate resistance lies at 1.0581 and support – at 1.0635, and if the day goes as calmly as it has opened, EUR/USD could remain squeezed in between the two levels.Sentiment remains bullish, contrasts pending orders
SWFX traders improved their sentiment on Friday, as 56% of open positions are long – up 5% form Thursday. Meanwhile, pending orders are bearish, as 65% of commands are to sell the Euro.
Spreads (avg,pip) / Trading volume / Volatility
Average forecast says EUR/USD will trade around 1.0718 by the start of March
Traders, who were questioned on their longer-term views on EUR/USD between November 9 and December 9 expect, on average, the currency pair to trade around 1.0718 in early March. In addition, up to 44% (-3%) of participants believe the exchange rate will be generally above 1.08 in ninety days, 9% (-3%) alone see it above 1.16. Alongside, 21% (+2) of those surveyed reckon the pair will trade below 1.02 in three months.