EURUSD RETREATS AS THE ECB MAINTAINS QUICK STIMULUS EXIT

American stocks rose on Thursday as investors reacted to the ongoing earnings season and corporate dealmaking. The biggest deal of all was Elon Musk’s offer to buy Twitter, the social media company he uses regularly. He proposed to buy the company for $43 billion, which is a premium of about $5 billion. Meanwhile, banks like Goldman Sachs, Morgan Stanley, Citigroup, and Ally Financial published mixed results. In general, these banks showed that customer deposit growth waned while investment banking slowed. In the first quarter, the volume of deals dropped to by over 16% to $1 trillion.

The euro declined slightly after the European Central Bank delivered its interest rate decision. The bank, as was widely expected, decided to leave the deposit facility rate unchanged at -0.50% and the marginal lending facility at 0.25%. Most importantly, the ECB maintained that it would continue with its swift withdrawal of stimulus. The goal is to stem the relentless inflation without interfering with the ongoing recovery. Still, like other central banks, the ECB is concerned about stagflation, which happens when a period of high inflation is accompanied by slow economic growth. Other central banks like the bank of Canada and Reserve Bank of New Zealand raised interest rates this week.

The US dollar index lost its momentum as bond yields cooled down today. The index moved slightly below the $100 mark while the yield of the 10-year, 30-year, and 5-year bonds declined. Data published by the US showed that retail sales did well in March. In general, sales rose by 0.5% in March while the core sales rose by 1.1% in the same period. These numbers came a few days after the US published strong inflation data. Other numbers showed that the country’s export and import price indices rose in March. The two rose by 4.5% and 2.6%, respectively.

EURUSD

The EURUSD pair rose ahead of and after the ECB interest rate decision and then erased those gains. It is trading at 1.0869, which is the highest it has been since April 11th. On the four-hour chart, the pair has moved slightly below the 25-day moving average while the Relative Strength Index (RSI) and MACD have pointed downwards. Therefore, the pair will likely continue retreating since the hawkish sentiment by the ECB was already priced in.

GBPUSD

The GBPUSD pair rose to a high of 1.3133, which was the highest level since April 5th. The pair moved above the important resistance level at 1.3050. It is also approaching the important resistance level at 1.3168 and is also above the 25-day moving average. The MACD has crossed the neutral level. The pair will likely keep rising in the coming days.

XAUUSD

The XAUUSD pair moved sideways after the latest US retail sales numbers. It is trading at 1,974, which was the highest level since March 14th. The pair is still above the important support level at 1,966. It also rose above the 25-day and 50-day moving averages while the Relative Strength Index is slightly below the overbought level. Therefore, the pair will likely remain in this range towards the weekend.