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ECB More Dovish than Expected

by Archer Financial Services | Mar 07, 2019

By Alan Bush | Senior Financial Economist at ADMIS   

STOCK INDEX FUTURES

Stock index futures firmed after the European Central Bank at its policy meeting today was more dovish than most analysts had anticipated.

The number of U.S. workers filing new applications for unemployment benefits fell slightly last week.   Initial jobless claims declined 3,000 to 223,000 in the week ended March 2.   Economists had forecast 221,000 new applications for jobless benefits last week.

Stock index futures have been performing better than the news would suggest since late December.

 

CURRENCY FUTURES

The U.S. dollar advanced and the euro currency fell due to the dovish outcome of the ECB monetary policy meeting.  The bar was high for the ECB to surprise on the dovish side, but the central bank was able to do just that when it make a surprise announcement of providing more liquidity to banks to stimulate more lending on the back of slowing economic growth.

The ECB pushed out the timing for its first post-crisis rate increase to 2020 at the earliest.  The ECB’s rate on bank overnight deposits, which is currently its primary interest rate tool, remains unchanged at -0.40%.

The ECB said in a statement that the Governing Council now expects key ECB interest rates to remain at their present levels at least through the end of 2019, and in any case for as long as necessary.”

The euro zone fourth quarter gross domestic product was up 0.2% from the third quarter, which was in line with market expectations.

The British pound is lower in spite of news that U.K. house prices rebounded 5.9% in February.

The Canadian dollar is lower after a report showed Canada building permits declined 5.5% in January.  Expectations were for a 5.0% decline.  

The Australian dollar advanced when data showed that nation's trade surplus increased more than predicted in January, driven by higher exports.

 

INTEREST RATE MARKET FUTURES

Futures are higher after the European Central Bank at its policy meeting today was more dovish than most analysts had anticipated.

Financial futures markets are predicting a 90% probability that the fed funds rate will remain unchanged at the current level of 2.25%-2.50% this year. There is a 4% chance for a 25 basis point increase and there is a 6% probability of a decline in 2019.

A U.S.-China trade agreement, or strong hint of one, would be a catalyst to take futures lower.

 

SUPPORT AND RESISTANCE

March 19 S&P 500

Support    2758.00      Resistance    2781.00

 

March 19 U.S. Dollar Index

Support    96.650        Resistance    97.230

 

March 19 Euro Currency

Support    1.12450     Resistance    1.13320

 

March 19 Japanese Yen

Support    .89370       Resistance    .89750

 

March 19 Canadian Dollar

Support    .74340       Resistance    .74660

 

March 19 Australian Dollar

Support    .7020         Resistance    .7060

 

June 19 Thirty Year Treasury Bonds

Support    144^20      Resistance     145^16

 

April 19 Gold

Support    1278.0       Resistance    1294.0

 

May 19 Copper

Support    2.9000       Resistance    2.9350

 

April 19 Crude Oil

Support    56.03         Resistance    57.23


For more information about these markets, please contact Alan at 312.242.7911  or via email at alan.bush@admis.com. Thank you.

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Futures and options trading involve significant risk of loss and may not be suitable for everyone. Therefore, carefully consider whether such trading is suitable for you in light of your financial condition. The risk of loss in trading futures and options can be substantial. The views and opinions expressed in this letter are those of the author and do not reflect the views of ADM Investor Services, Inc. or its staff.  Research analyst does not currently maintain positions in the commodities specified within this report. The information provided is designed to assist in your analysis and evaluation of the futures and options markets.  However, any decisions you may make to buy, sell or hold a futures or options position on such research are entirely your own and not in any way deemed to be endorsed by or attributed to ADMIS. Copyright © ADM Investor Services, Inc.

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