ECBs Christine Lagarde's comments can be grouped into several key topics:
Economic Outlook and Recovery Indicators:
- PMI a small signal that recovery conditions are coming into place.
- Some surveys point to growth further ahead.
- Incoming data signal weakness in near term.
- Economy likely to have stagnated in Q4.
Inflation and Monetary Policy:
- Need to be further along in disinflation process before we are confident about hitting target.
- Not seeing second round effects.
- Inflation could fall more quickly if energy prices evolve in line with recent downward shift.
- Geopolitical tensions in the Middle East are an upside risk to inflation.
- Longer-term inflation expectations mostly stand around 2%.
- Domestic price pressures high but some measures started to ease.
- Inflation expected to ease further over 2024.
Labour Market Dynamics:
- Seeing slight reduction of vacancies advertised.
- Seeing some stabilization in wage tracker.
- Hope is that wage increases are sufficiently absorbed by profits.
- Wage growth directionally good.
- Demand for labor slowing.
- Labour market robust.
Policy and Regulatory Framework:
- Framework review won't necessarily matter in the short term.
- Framework review outcome most likely to come by the end of the spring.
- Framework review work advancing at a fast pace.
- New budget rules should be implemented without delay.
ECB's Approach and Decision-Making Process:
- Don't be overly focused on changes in wording of statement.
- Not fixated on calendar.
- Consensus that we must be data dependent.
- Stand by previous comments on rates.
- Consensus at table that it's premature to talk about rate cuts.
External Factors Affecting Economic Conditions:
- Observing shipping cost increases, delivery delays.
The EURUSD has moved lower and is now looking toward the 200-day MA at 1.08434. The 100 and 200 hour MAs were broken at 1.0887 and 1.0882 tilting the bias lower. The price is now also back below the 38.2% of the move up from the October 2023 low at 1.0875. Those breaks tilted the technical bias to the downside. The 200 day MA remains a key hurdle to get to and through to increase the bullish bias.
Recall that on Tuesday, the 200-day moving average was broken and the price moved down to a low of 1.0821 on selling on the break. However, the price rebounded and closed back above that moving average leading to the run higher during yesterday's trading. Falling back below the 200 and moving average is key for a more bearish bias going forward.
