8th March 2019
Eurozone interest rates will stay at rock bottom until at least next year after an economic slowdown threw the European Central Bank’s plans to gradually tighten policy off track.
Slumping growth also forced Mario Draghi, the Bank’s president, to launch a new scheme to pump cheap funds into eurozone banks, bolstering lenders across the currency area but particularly in recession-struck Italy.
The scheme, known as TLTRO, offers banks funds amounting to 30pc of their lending at the end of February, for two years.
The central bank also revised its guidance on interest rates, warning that investors will be waiting until at least the end of 2019 for the first hike. The fresh stimulus comes just months after the central bank ended its quantitative easing programme. It slashed its forecasts for the eurozone, expecting growth to slow to just 1.1pc in 2019, down from December’s forecast of 1.7pc.
ECB president Mario Draghi blamed the “slowdown in world trade” for the downgrade in its forecasts, warning that business confidence had been knocked by trade tensions. “We are in a period of continued weakness and pervasive uncertainty,” Mr Draghi warned. The ECB has been forced into action by a sharp slowdown across the currency bloc, particularly in Italy and Germany.
Stocks Slide After ECB
Shares in Asia fell after a drop in tech stocks helped send U.S. equities to their longest losing streak this year. The ECB’s grim economic forecasts reinforced concerns that global growth is slowing, fueling the decline. The euro fell to the lowest since 2017. The S&P 500 Index sank for a fourth day, with Amazon, Microsoft, Apple and Facebook the biggest drags. The gauge closed just below the closely watched 200-day moving average of 2,750 that has provided support in the past. Government bonds surged, with the yield on Germany’s 10-year notes reaching the lowest since 2016. The dollar climbed for a seventh day.
FTSE 100 Trading Signals, Forecast and Prediction
The bulls failed to break above the 7200 resistance level yesterday, despite managing to close the gap at 7193 at one point. The 2 hour resistance level we had at 7175 held initially, and as expected we had the flat morning. However, the bears have now regained control and are looking for a drop down initially this morning to the 7105 support area. Below this we have 7067, which looks like it may well see a bounce, though against the pessimistic backdrop it might not be that much of one. Of course, the big news event today is NFP at 13:30, with the forecast slightly below last months at 180k (last month 304k), Unemployment is also expected to have dropped to 3.9%.
If the bears break the 7067 support level then the bottom of both the Raff channels are in the 7025/7030 area so we will more than likely see a drop down to this area if that support breaks. The round number support of 7000 below this of course, then 6967 – a level that they will definitely be keen to defend.
On the bull side of the coin, there is initial resistance at 7125 and above this the 200ema and daily pivot area at the 7150 area. If we were to retrace a bit to here then its probably worth a short to target the 7125 and 7105 (maybe lower) levels. Initially I am expecting the 7125 resistance level to hold though on any opening bounce. Good luck today!
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