The first trading week in March brought many economic publications and new insights into the QE program on the part of the ECB. Although the stock markets were still at risk of a major correction until the middle of the week, the expectations of market participants were not disappointed by the ECB and the euro against the US dollar started to descend to a three-year low and the DAX climbed to 11,500 points for the first time.
Economy and monetary policy
EU: Spain, France and the EU recorded falling purchasing manager indices for manufacturing in February. Germany's index rose slightly. In addition, the Italian unemployment rate fell by 0.3%. The unemployment rate in the EU also fell by 0.1%, which is not a lot, but at 11.2% the lowest level in the past four years.
The EU consumer price index for February and compared to The previous year developed better than expected and only decreased by -0.3%, the forecast was -0.4%. By contrast, core consumer prices remained unchanged at 0.6% compared to the previous year.
The German retail sector was also positive in January. Revenues increased significantly compared to both the previous year and the previous month. EU retail sales also rose significantly in January. However, producer prices for the entire EU zone fell more than expected in January.
Purchasing manager indices for the service sector were almost entirely negative. Only France saw no change from the previous month, but the unemployment rate rose by 0.1% in January. Italian GDP for the fourth quarter of 2014 was unfortunately not convincing and fell by -0.5% compared to the previous year, while there was no increase compared to the previous quarter. German work orders were negative, stagnating in January after a significant increase in the previous month.
USA: The manufacturing index in the United States was negative in February, disappointing market participants. However, the index for the service sector was significantly more positive than expected. The labor market report is due again this week. A preview of this was provided by the publication of non-farm productivity for the fourth quarter of 2014 and the applications for unemployment benefits. Neither was particularly positive. Unemployment claims rose against expectations, while productivity fell as expected.
Monetary Policy: The ECB released QE program details this week. However, there was little new, only what was already known was confirmed. This confirmed the expectations of market participants in the further course of loose monetary policy. The program starts next Monday and bonds worth EUR 60 billion are to be purchased every month.
Technical assessment of the markets:
EUR / USD: According to the ECB's announcement, the euro reached a three-year low just under $ 1.10 per euro. This continues towards parity. On a daily basis, support is few and far between. The next relevant support would be in the range of $ 1.05-1.06 per euro. However, headwinds can be expected for a short time at the economic level (labor market report).
DAX: Technically speaking, the leading German index is negatively correlated with EUR / USD. This is not surprising, since the currency effect also has an impact on the German stock markets. An attempt at a correction from the beginning of March initially failed. Nevertheless, caution should be exercised, because two strong subsequent months result in a no less strong correction. From a technical point of view, there is a short-term upward potential in the range between 11,600-11,700 points. A correction should no longer be ruled out below 11,400 points.
GBP / USD: Also the British Pound had to bow to the strength of the US dollar. The currency pair is currently trading at $ 1.52 per pound sterling and the downtrend is likely to continue dynamically as long as the dollar remains strong.
USD / JPY: The carry trade currency continues to fluctuate in a slight upward trend. If the monetary and fiscal politicians in Japan agreed, the yen might long ago depreciate further. However, some officials seem to have reached the limit on the current course. This stirs up uncertainty about further devaluation, although loose monetary policy remains stimulating. Technically speaking, a sustained exceeding of the 121.00 Japanese yen per US dollar could initiate a push towards 123.00.
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