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By: Stuart Cowell
Eurozone Sentix investor confidence fell back in February. The headline number remained positive at 5.2, but the drop from 7.6 in January marked the first setback since October last year, which highlights that the relief over the clearer political situation in the UK and the signing of the phase-one trade deal between China and the US has been dented. The coronavirus outbreak clearly plays a role, but it is also likely that investors have realised that the signing of the Withdrawal Agreement in the UK still doesn’t secure a trade deal further down the line. The breakdown for the Sentix index showed that both the assessment of the current situation as well as the expectations reading fell back in February.
Earlier, Luis de Guindos, the ECB’s vice president, told Spanish newspaper Expansion that the ECB hasn’t reached the reversal rate and still has tools to support the economy if needed, including cutting interest rates further alongside debt purchases. Still, while the comments confirm that the ECB has an easing bias and is ready to step in should the fallout from the coronavirus outbreak force the ECB to change its central scenario for the economy, Guindos also stressed again that the side effects of the very accommodative policy are becoming more evident. Guindos added to the growing number of voices calling for other policies to support monetary policy which means fiscal authorities should step up their efforts to promote growth and investment. All of which is very much in line with the tone his boss (Ms Lagarde) took last week. Markets await any news surrounding the direction of the Strategy Review.
EURUSD dipped to 1.0944 from the daily pivot point at 1.0957 and clings to the 20-hour moving average. S1 sits at 1.0930 with the upper Bollinger band and 50-hour moving average converging at 1.0965 below R1 at 1.0972. EURGBP turned down from 0.8500, through R1, to test the daily pivot point at 0.8475, while the 200-hour moving average and lower Bollinger band converge at 0.8470.
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