ECB kept the main refinancing rate at 0.00% and deposit rate at -0.4% as widely expected. There is also no change to the asset purchase program. The central bank extended the program to December 2017, buying EUR 60b a month. ECB president Mario Draghi noted in the post meeting press conference that "there are no signs yet of a convincing upward trend in underlying inflation." He emphasized that "a very substantial degree of monetary accommodation is needed for euro area inflation pressures to build up and support headline inflation in the medium term". Meanwhile, growth would be "dampened" by "sluggish pace of structural reform" in the region. Euro lost much momentum against Dollar and Sterling and is trading mildly lower. Also from Europe, Eurozone current account surplus widened to EUR 36.1b in November. UK RICS house price balance dropped to 24 in December. Swiss PPI rose 0.2% mom, 0.0% yoy in December.

Economic data from US are generally strong and is providing Dollar mild strength for rebound. Initial jobless claims dropped 1.5k to 234k in the week ended January 14, below expectation of 251k. Four-week moving average of initial claims dropped 10.25k to 246.75k, lowest since November 1973. That’s also the 98 straight week of sub 300k reading, longest streak since 1970. Continuing claims dropped 47k to 2.05m in the week ended January 7. Housing starts jumped 11.3% to 1.23m annualized rate in December, above expectation of 1.19m. Building permits rose to 1.21m but misse3d expectation of 1.22. Philly Fed survey rose to 23.6 in January, above expectation of 16.

Released from Canada, manufacturing shipments rose 1.5% mom in November. International securities transactions dropped to CAD 7.24b in November. BoC left its overnight rate unchanged at 0.5% yesterday. Yet, it delivered a more dovish than expected message and sent CAD to a one-week low against USD. At the press conference, Governor Stephen Poloz revealed that ‘Governing Council was particularly concerned about the ramifications of U.S. trade policy, because it is so fundamental to the Canadian economy’. He suggested that further rate cut cannot be ruled out of US’ protectionist policy puts BOC’s inflation target at risk. More in BOC Sent Dovish Message On Concerns Over Trump’s Protectionist Policy.

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Released earlier today, New Zealand business NZ manufacturing index rose to 54.5 in December, building permits dropped -9.2% mom in November. Australia employment rose 13.5k in December but unemployment rate rose to 5.8%.

EUR/USD Mid-Day Outlook

Daily Pivots: (S1) 1.0600; (P) 1.0657 (R1) 1.0685; More…..

EUR/USD retreated after hitting 38.2% retracement of 1.1298 to 1.0339. Intraday bias is turned neutral first. Rebound from 1.0339 is seen as a corrective move. Below 1.0453 will argue that it’s completed and turn bias back to the downside for 1.0339 support. Break there will extend the larger down trend towards parity. In case of another rise, we’d expect upside to be limited by 1.0872 resistance and bring reversal.

In the bigger picture, whole down trend from 1.6039 (2008 high) is in progress. Such down trend is expected to extend to 61.8% projection of 1.3993 to 1.0461 from 1.1298 at 0.9115. On the upside, break of 1.1298 resistance is needed to confirm medium term bottoming. Otherwise, outlook will stay bearish in case of rebound.

EUR/USD 4 Hours Chart

EUR/USD Daily Chart

Economic Indicators Update

GMT Ccy Events Actual Consensus Previous Revised
21:30 NZD Business NZ Manufacturing Index Dec 54.5 54.4 54.5
21:45 NZD Building Permits M/M Nov -9.20% 2.60% 2.00%
00:00 AUD Consumer Inflation Expectation Jan 4.30% 3.40%
00:01 GBP RICS House Price Balance Dec 24% 30% 30% 29%
00:30 AUD Employment Change Dec 13.5k 10k 39.1k
00:30 AUD Unemployment Rate Dec 5.80% 5.70% 5.70%
08:15 CHF Producer & Import Prices M/M Dec 0.20% 0.20% 0.10%
08:15 CHF Producer & Import Prices Y/Y Dec 0.00% 0.10% -0.60%
09:00 EUR Eurozone Current Account (EUR) Nov 36.1B 29.3B 28.4B 28.3B
12:45 EUR ECB Rate Decision 0.00% 0.00% 0.00%
13:30 CAD International Securities Transactions (CAD) Nov 7.24B 10.23B 15.75B 15.77B
13:30 CAD Manufacturing Shipments M/M Nov 1.50% 1.00% -0.80% -0.60%
13:30 USD Initial Jobless Claims (JAN 14) 234K 251k 247k 249K
13:30 USD Housing Starts Dec 1.23M 1.19M 1.09M
13:30 USD Building Permits Dec 1.21M 1.22M 1.20M
13:30 USD Philly Fed Manufacturing Index Jan 23.6 16 21.5
15:30 USD Natural Gas Storage -151B
16:00 USD Crude Oil Inventories 4.1M

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