ECB delivers as trade truce speculated

The European Central Bank (ECB) delivered alongside fresh trade deal speculations altogether invoking another wave of positive sentiment into the end of the week for Asia markets.

EUR rose on speculated trade truce

The wavering of the market given the uncertainties of the extent of support the ECB would deliver this week came to an end with the 10-basis point cut to deposit rate to -0.5%, tiered reserves system and the restart of quantitative easing (QE) from November. While the rate cut had been within expectations, there had certainly been some contemplation over the extent of the QE. Both the early start date from November 1 and the open-ended end for ‘as long as necessary’ had perhaps been a pleasant relief in light of the concerns over the euro area’s economic health. ECB president Mario Draghi’s swan song at the helm had been the gift of looser monetary conditions for the euro area, though it remains to be seen if this is adequate to reflate the eurozone as the focus shifts towards fiscal policy with the handover to his successor Christine Lagarde.

For EUR/USD which had been particularly sensitive towards the chatters around monetary policy in the lead up to the ECB meeting, prices had notably slipped towards last week’s lows for the year with the array of measures announced. That said, this was before the currency pair sharply reversed with reports suggesting a trade truce between US and China. For what it is worth, President Donald Trump had also remarked that he would consider an interim trade deal though preferring a lasting one. Such a scenario is expected to serve as a support for markets in the near to medium term amid the uncertainties, though this would hardly be equated to a quick step towards resolution.

EUR/USD can be seen jumping on the positive turn in sentiment, mostly with the greenback itself declining on the improvement in risk sentiment. With this jump, EUR/USD is now pushing at the downtrend resistance, one to watch for a break here for a reversal in trend particularly if there should be a carry through of the impact towards economic conditions.

Source: IG Charts

Pressure on the Fed

With the series of improvement in US-China trade rhetoric and the latest murmurs of an interim trade deal, alongside the latest jump in US CPI data, it will be one to consider how the Fed will shape the forward guidance next week. US core CPI reading surprised at 0.3% month-on-month (MoM) while headline CPI came in line with consensus at 0.1%. As far as the bond market is suggesting with US 10-year yield edging higher, it does appear that the impetus for the Fed to continue cutting rates have slightly diminished thus far.

Yesterday: S&P 500 +0.29%; DJIA +0.17%; DAX +0.41%; FTSE +0.09%

IGA, may distribute information/research produced by its respective foreign affiliates within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.

The information/research herein is prepared by IG Asia Pte Ltd (IGA) and its foreign affiliated companies (collectively known as the IG Group) and is intended for general circulation only. It does not take into account the specific investment objectives, financial situation, or particular needs of any particular person. You should take into account your specific investment objectives, financial situation, and particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit.

Please see important Research Disclaimer.

Take a position on indices

Deal on the world’s major stock indices today.

  • Trade the lowest Wall Street spreads on the market
  • 1-point spread on the FTSE 100 and Germany 40
  • The only provider to offer 24-hour pricing

Live prices on most popular markets

  • Forex
  • Shares
  • Indices

Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 15 mins.


Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 20 mins.

The Momentum Report

Get the week’s momentum report sent directly to your inbox every Monday for FREE. The Week Ahead gives you a full calendar of upcoming key events to monitor in the coming week, as well as commentary and insight from our expert analysts on the major indices to watch.

For more info on how we might use your data, see our privacy notice and access policy and privacy webpage.

You might be interested in…

Find out what charges your trades could incur with our transparent fee structure.

Discover why so many clients choose us, and what makes us a world-leading provider of CFDs.

Stay on top of upcoming market-moving events with our customisable economic calendar.