In the post meeting press conference, ECB President Christine Large warned that the spread of coronavirus has been as “major shock” to global and Eurozone growth prospects. And, “even if ultimately temporary in nature, it will have a significant impact on economic activity”. There will be slowdown in production as a result of supply chains disruption, reduced domestic and foreign demands. In addition, the heightened uncertainty negatively affects expenditure plans and their financing.”
She urged government and all other policy institutions to “take timely and targeted actions to address the public health challenge of containing the spread of the coronavirus and mitigate its economic impact”. In particular, “an ambitious and coordinated fiscal policy response is required to support businesses and workers at risk.”
In the march ECB staff macroeconomic projections, GDP growth for 2020 was downgraded from 1.1% to 0.8%, with “very muted growth in H1. 2021 growth was revised down from 1.4% to 1.3%. 2020 HICP inflation is projected at 1.1%, and 1.4% in 2021, unchanged. But recent sharp decline in oil prices poses significant downside risks to short-term inflation outlook.
Gold dives on Dollar rebound, focus on 1557 key support
Gold drops sharply following Dollar’s rebound today and the steep decline suggests that rise from 1562.9 has completed at 1703.28. At this point, outlook near term outlook is just neutral with 1557.04 resistance turned support intact. That is, larger up trend from 1160.17 is still in favor to extend through 1703.28 at a later stage.
However, the picture is not looking too good with bearish divergence condition in daily MACD. Firm break of 1557.04 will confirm medium term topping. In that case, we should at least see correction to 38.2% retracement of 1160.17 to 1703.28 at 1495.81.