DOLLAR FALLS, EURO GAINS ON GARY COHN RESIGNATION AND ECB MEETING
The dollar fell after Donald Trump’s Chief Economic Advisor, Gary Cohn announced his resignation. This came after he differed with Trump about steel and aluminium tariffs set to be announced this week. His resignation was a blow to the financial markets, which were hopeful that he would help sway Trump from his populist ideas. After the announcement, the dollar index fell by 0.15%. From the data side, private firm ADP showed that the US created more than 235K jobs in February, beating analysts’ estimates of 186K.
In the European Union, the ECB started its two-day meeting today. The meeting comes at a difficult time for the European Union which is bracing itself for a trade war with the United States. Yesterday, Bloomberg released a list of American items that will be subjected to taxes. Today, a commissioner for the EU said that the list would be broader than the one reported by Bloomberg. The report came as the EU released its Q4 GDP numbers that met analysts’ estimates. The Q4 QoQ GDP grew by 0.6% while the annualized number remained at 2.7%.
In Australia, the Australian Bureau of Statistics released GDP numbers that missed analysts’ forecasts. The numbers showed that the economy grew by 0.4% in Q4 and at an annual rate of 2.4%. Analysts expected it to grow by 0.5% and 2.5% respectively. The numbers came after the RBA left interest rates unchanged and signaled that the economy would continue to improve gradually.
In the past one week, the pair has managed to move from a low of 1.2154 to today’s intraday high of 1.2444. The weakness of the dollar is a result of the possible trade war. Today, the pair is little moved as traders wait for tomorrow’s statement from the ECB. The pair is currently above the 50-day SMA of 1.2377 and the 200-day SMA of 1.2300. Depending on the guidance from the ECB tomorrow, the pair could drop to these MAs or move up to the 1.2500 level.
The Australian dollar rose against the dollar even after the GDP numbers disappointed. The pair has risen from a weekly low of 0.7712 to a high of 1.7814. With no major economic news from Australia, traders will focus on the United States where we expect a report on jobs numbers on Friday. Traders should now watch out for a reversal to the 0.7776 level or a continued rise to the 0.7814 level.
Germany’s DAX shrugged off trade war rumours and gained by more than 0.70%. The gain was led by Lufthansa and Vonovia which posted 3.96% and 2.69% gains. The big losers were automakers, Volkswagen and Daimler which would suffer in case of a trade war. They were down by 1.30% and 0.50% respectively. The short-term trend for the index will be determined by the moves of Trump and how the EU responds. This could see the index surging above the weekly high of £12,257 or fall to a multi-monthly low of £11,721.