Article by ForexTime
EUR/USD held steady after an as expected announcement from the European Central bank that interest rates will remain unchanged. Despite the recent spate of worse than expected data, the currency pair touched 1.3359. The ECB seems to be committed to a wait and see policy, and full fledge QE is a hard they are still holding. Concerns over Ukraine/Russia impact on the European economy will add pressure to the ECB to take further actions.
German June industrial production rose 0.3% month over month, a modest rebound after the 1.7% month over month decline in May and in fact the first improvement since February. The annual rate dropped to -0.4% year over year, the first negative rate since July last year. The June number left production down a staggering 1.5% q/q in Q2, after a 1.1% q/q rise in the first quarter, which means Q2 GDP growth is likely to have been even weaker than anticipated.
Coupled with the slump in orders data yesterday and the decline in ZEW and Ifo readings, the numbers suggest that the German recovery is not only stalling, but is severely threatened as the deepening sanctions against Russia are leaving their mark. Unemployment is improving and the low interest rate environment is discouraging savings, but that consumption alone can make up for the drop in production seems unlikely.
Spanish industrial production rose 0.8% m/m in June, less than expected and down from 2.5% m/m in the previous month. The weaker than expected number could mean a downward revision to the Q2 GDP estimate, which came in higher than expected at 0.6% q/q.
Wednesday’s snap back rally, was met with resistance near the 10-day moving average near 1.3400. Momentum has flattened as the MACD (moving average convergence divergence) index prints in positive territory with a flat trajectory. The RSI (relative strength index) has remained stable but the current reading of 30 is at the oversold trigger level, which could foreshadow a correction.
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