EURO SLUMPS AFTER THE ECB RATE DECISION
The Australian Bureau of Statistics (ABS) released employment numbers for the month of May. The unemployment rate dropped to 5.4%, which is the lowest level since 2012. That was the only good news. The number of people who were employed during the month was 12K, which was lower than the expected 18K. Worse, the participation rate – which measures the number of people actively looking for work – dropped to 65.5% from last month’s 65.6%.
In the United Kingdom, the Office of National Statistics (ONS) released retail sales for the month of May. The retail sales rose by 1.3% and at an annual rate of 3.9%. This was higher than the expected 0.5% and 2.4% respective increase. The closely-followed core retail sales increased at a MoM rate of 1.3%, which was higher than the expected 0.3% and at an annual rate of 4.4% which was higher than the expected 2.5%. The jump in retail sales was attributed to the royal wedding, which happened earlier in the month. It was the most watched event in the UK this year.
In China, the statistics bureau released disappointing industrial production, fixed asset investment, and retail sales data. The industrial production rose by 6.8% which was lower than the expected 6.9%. The retail sales numbers rose an annualized rate of 8.5%, which was lower than the expected 9.6%. In addition, the fixed asset investments rose by 6.1%, which was at a slower pace than the expected 7.0%. These numbers are a reflection of the impact of the increased trade tensions. These tensions are expected to rise as the Trump administration releases a list of the items from China it will place tariffs on.
The biggest news today was from the European Central Bank (ECB). The officials left interest rates unchanged, which was expected. Traders were waiting for the decision on quantitative easing and an indication of when a rate hike would come. In the accompanying statement, the officials said that they would reduce the amount of asset purchases to 15 billion euros until the end of December. A rate hike is expected to come in the summer of 2019.
In the United States, the Fed yesterday raised interest rates by a quarter point and signaled two more hikes this year. The strength of the economy was reflected by strong retail sales which increased by 0.8 compared with the expected 0.4%. Core retail sales increased by 0.9%, which was higher than the expected 0.5%. Initial jobless claims were at 218K, which was better than the expected 223K.
After rising throughout the day, the EUR/USD pair reversed and fell to the lowest level since Wednesday last week. The pair is now trading at the 1.1722 level which is below the important resistance of 1.1838. The pair could continue moving lower, which could make it test the important support of 1.1650 as traders give up on a rate hike this year.
After the retail sales were released, the GBP/USD pair jumped from a low of 1.3305 and soared to an intraday high of 1.3445. The pair then reversed and is currently trading at 1.3376, which is also the 38.2% Fibonacci Retracement level. It could continue moving lower to 1.3378 which is the 50% Fibonacci Retracement level.
The AUD/USD pair fell to an intraday low of 0.7528 after the country released the employment numbers for May. The pair then recovered and moved above the 50% Fibonacci Retracement level of 0.7580. It then reversed and is currently trading at 0.7560, which is between the 23.6% and 38.6% Fibonacci Retracement level. It is also in line with the 50-day moving average. The pair could continue heading lower as it heads to the intraday low.