Equity markets gained ground throughout Asia-Pacific trade, as information of a potential bipartisan stimulus plan out of the US buoyed hazard assets. Australia's ASX 200 climbed 0.84%, while Japan's Nikkei 225 soared 1.55%. Hong Kong's Hang Seng Index stormed 2.27% greater while China's CSI 300 climbed 1.23%.
Silver surged more than 7% on the back of a Reddit-inspired buying spree and gold climbed just under 1%. Looking ahead, Euro-area unemployment data for December headlines the economic docket alongside manufacturing PMI figures out of the usa.
The Euro may recover lost ground against the US Dollar in the forthcoming weeks, as better-than-expected economic data suggests that the impact of a second wave of this novel coronavirus was not as detrimental as the first one endured in March.
Fourth quarter GDP prints from France, Germany and Spain indicate that the trading bloc's economy might have weathered the storm better than originally forecast. Preliminary figures showed that the Spanish economy grew by 0.4% (est -1.5%), while the German and French markets contracted less than consensus estimates estimated.
A sudden jump in consumer price growth in Germany may also underpin the Euro from its major counterparts, with the country's inflation rate rising to 1 percent in January (est. 0.7%). However, European Central Bank executive board member Isabel Schnabel warned this sudden jump in inflation is a temporary anomaly and"should not be mistaken for a sustained growth in inflation".
Additionally, several ECB Governing Council members have stated that the central bank is ready to utilize all of its tools in order to stimulate consumer cost development, and have flagged the potential for cutting interest rates into negative territory.
Governing Council member Klaas Knot said that"there's still space to reduce rates, but of course that would also must be seen in conjunction to our general financial stance", while his colleague Olli Rehn reiterated the central bank's commitment to"usage and adapt each of our tools as appropriate".
That being said, with all the Euro-zone's core inflation rate anticipated to rise to 0.9percent (prev. 0.2percent ) and headline inflation forecast to rise to 0.5percent (prev. -0.3percent ) in January, the possibility of further monetary easing seems relatively unlikely.
Thus, a less-than-expected contraction at Euro-area GDP, in tandem with a surprising leap in inflation, could decrease the possibility of additional easing by the ECB and in turn buoy the Euro in the long run.
EUR/USD DAILY CHART -- HEAD AND SHOULDERS TOP OR CONTINUED TOPSIDE PUSH?
The technical outlook for EUR/USD rates seems relatively blended, as price carves out a possible Head and Shoulders reversal pattern over an integral inflection array at 1.2055 -- 1.2075.
Remaining constructively positioned over 1.2050 could open the door for buyers to continue pushing the exchange rate greater, with a rest above the 21-day exponential moving average (1.2147) probably carving a route to challenge the annual high (1.2349).
However, a daily close below the January 18 low (1.2053) would probably affirm the bearish reversal pattern and intensify near-term selling strain. The Head and Shoulders suggested quantified move suggesting that price could fall up to 3 percent from present levels to probe emotional aid at 1.1800.
The IG Client Sentiment Report reveals 38.14percent of traders are net-long with the ratio of traders short to long at 1.62 to 1. The number of dealers net-long is 12.27% greater compared to yesterday and 7.61% lower from last week, while the number of traders net-short is 4.90% greater compared to yesterday and 2.24% lower from last week.
We typically have a contrarian perspective to audience sentiment, and the truth that traders are net-short indicates EUR/USD prices will continue to grow.
Positioning is not as net-short than yesterday however more net-short from a week. The blend of present sentiment and current changes gives us an additional combined EUR/USD trading bias.
