News & Analysis

Weekly Summary – Mario Draghi Revived the ECB’s Stimulus

September 13, 2019

Weekly Summary

Risk sentiment is slowing crawling back into the markets as geopolitical tensions have eased and there is a possibility that tariffs on Chinese goods might be delayed. However, throughout the week, the focus has been on the European Central Bank (ECB) and its interest rate decision and statement.

Brexit – UK Parliament Prorogued

The UK Parliament was officially prorogued until the 14th of October earlier during the week. The prorogation means that MPs will have limited time before the Brexit deadline to prevent the UK from leaving the EU without a deal.

Scotland’s highest civil court has ruled that the Prime Minister’s advice to the Queen on suspending UK Parliament was unlawful. Many lawmakers filed in separate courts to challenge the suspension of the UK Parliament.

The votes for delaying Brexit has helped the Sterling pairs to rebound. The GBPUSD pair rose to the 1.23 level on Monday and has since consolidated in a tight range around that level. Traders are awaiting fresh developments on the prorogation.

GBPUSD (Daily Chart)

Source: GO MT4

Iran Sanctions

President Trump surprised investors with the possibilities of easing sanctions on Iran to spur nuclear talks. It was reported that the US President might meet President Hassan Rouhani might later this month.

Fundamentally, the easing in tensions between the US and Iran could allow Iranian oil back into the market place. On Thursday, OPEC and its oil-producing allies have put off any talks to commit to a larger production cut amid fears of mounting global supply glut.

As a result, despite large inventories draw, oil prices fell in anticipation of an increase in supply.

UKOUSD and USOUSD (Hourly Chart)

Source: GO MT4

ECB- Mario Draghi Revived the ECB’s stimulus

As his eight-year term comes to an end, Mario Draghi felt the pressure to use all the necessary tools at his disposition to stimulate the Eurozone economy in the face of trade wars and the ongoing disruptions from Brexit.

The ECB delivered a rate cut of 10 basis points to -0.50% and revived the stimulus program that stopped in December. Net purchases will be restarted under the Governing Council’s asset purchase programme (APP) at a monthly pace of €20 billion as from 1 November.

The Euro seesawed following the EC’s decision. The central bank cut rates for the first time since 2016 and announced the new round of bond-buying which caused the EURUSD pair to plummet by more than 150 pips.

However, the ECB failed to satisfy fully the dovish expectations instilled in the markets. The bearish pressure turned bullish due to the less-dovish message. The pair has even rebounded to the highest levels in a week.

EURUSD (Hourly Chart)

Source: GO MT4

Attention now switches to the Fed’s interest rate decision next week.

Apple – Unveiled New Products

Apple launched its new products and rather than the products itself, the aggressive pricing strategy triggered a rally on Wall Street. Apple’s share price jumped by more than 3% mostly on the fact that the new iPhone 11 is cheaper than the XR when it was launched. The new pricing might drive more demand at a time the Apple’s position in the smartphones market has gradually been taken away by rivals.

Apple recaptured the US$1 trillion market value level and helped the S&P500 close above the 3000 marks for the first time since July.

Monday, 16 September 2019 Indicative Index Dividends ^{Dividends are in Points}
ASX200	WS30	US500	US2000	NDX100	CAC40	STOXX50
0.301	0	0.092	0.075	0	0.165	0
ESP35	ITA40	FTSE100	DAX30	HK50	JP225	INDIA50
0	2.235	0	0	7.906	0	0

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