The US dollar is overvalued. The US national debt is 104% of GDP, and the annual balance of trade deficit is over $500 billion. Despite these figures, there are many who consider the US dollar a safe haven currency, and the dollar is holding up in the FX markets.
The Sterling refuses to edge lower and appears to be headed towards the resistance line above 1.49. However, the Cable is first required to pierce through the supply area at 1.4446, represented by the monthly R1, which limited the pair's volatility on Friday. The 1.44 psychological level is also playing a part in the pair's ability to appreciate, thus, due to no impetus present to push the Pound higher today. As a result, a corrective decline is likely to take place, but the bearish momentum could fail to exceed the 1.4345 mark, as the 55-day SMA and the weekly PP are providing immediate support there.
A broad buoyant sentiment pushed the precious metal to fresh 13-month highs by Friday morning. Yesterday the bullion's selloff was successfully limited by the February uptrend below 1,240, and later moderately hawkish remarks by the ECB President Draghi resulted in a surge above 1,270. For now we see the weekly R1 as the first reliable resistance for the remaining 24 hours of this week's trading, with monthly R1 at 1,295 acting as the second supply level. As daily and weekly technical indicators are mostly bullish, we assume that gradual price increases will stay in place.
The ECB announced a significant package to ease monetary policy as updated staff macroeconomic forecasts showed that the inflation outlook had materially deteriorated since December. The measures presented exceeded expectations, but the decision failed to convince markets.
The European Central Bank (ECB) have very much taken the ‘kitchen sink’ approach, surprising market expectations in a variety of ways, not least an expansion of the asset purchase programme to include corporate bonds and opening the door to paying banks to borrow via the longer‑term refinancing operations (LTROs). They hope that the measures announced will ease financial conditions and stimulate new credit creation, leading to stronger growth and a return of inflation to target.
Following a 25% increase in China bankruptcies in 2015, insolvencies will increase 20% in 2016, predicts Euler Hermes. This has implications not only for the "Red Dragon" itself but also for its trading partners. Industrial countries have a relatively robust immune system compared to many emerging markets.
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