The euro continued to push at the lows of the year, after the release of yesterday's data indicating that the number of jobs in the German manufacturing sector fell in December, as compared to the previous year. The poor indicators for the Euro zone economy have long set investors and traders on the idea that in the spring of this year, the European Central Bank may further ease the course of monetary policy, which is the reason why the euro is currently under pressure. Most likely, the Central Bank will continue to lower negative deposit rates and, quite possibly, make the key interest rate, which is now at zero, negative. This is reflected in euro's quotes, which, since the beginning of February this year, has collapsed from the level of 1.1100 to 1.0830. Of course, there may be upward corrections, but it is likely to be just short. Only the return in the level of 1.0860 by the bulls will lead to the recovery of risky assets in the area of 1.0890 and, quite possibly, to the update of 1.0930. If the pressure on the euro continues, the next lows will be found in the area of 1.0800, or even lower, near the level of 1.0770. A break in these ranges will open a direct path to the psychological level of 1.0500.
Yesterday's report of the National Bureau of Statistics, Destatis, indicated that the number of jobs in the manufacturing sector decreased by 30,000, or 0.5% compared to December 2018. It amounted to 5.6 million. Meanwhile, the number of hours worked also decreased by 0.5%. The positive point can be attributed to a small increase in earnings in the manufacturing sector, which in December 2019 increased by 0.7% compared to the same period of the previous year, and amounted to 24.3 billion euros.
It seems that not only one European Central Bank is concerned about what is happening to the economy right now. Yesterday, the German Bundesbank called on the German government to direct a significant budget surplus to support economic growth. Recent figures for German GDP and industrial production actually confirm this need, given the risk of a technical recession in the spring of this year. The regulator also drew attention to the risks that are present due to the coronavirus outbreak in China.
It is worth noting that the Bundesbank has always taken a conservative position in its approach to stimulating the economy. Moreover, it recently stated that there is no need for incentives, however, now, we can see how the priorities have changed, which is another confirmation of the possible change in the Eurozone's monetary policy in the near future.
Another interesting news was the White House's deliberation on the issue of restrictions on the use of American equipment for the production of semiconductors. It is possible that the introduction of restrictions is directly related to Huawei, which is one of the main issues included on the second phase of the trade negotiations between US and China. The administration noted that the restrictions may affect the semiconductor industry outside of China.
The British pound is gradually declining against the US dollar, amidst uncertainty about the future of UK's trade relationship with EU. If last week, the market was optimistic about the news about the appointment of a new Finance Minister, now, there are no new reasons for joy. Some economists note that even if the country's government significantly increase budget spending, it will not provide much support to the economy. The tensions in the UK-EU trade relations will continue to put pressure on the pound. Sharp jumps of growth in the pound will only be possible after the appearance of positive news.
The aussie collapsed after the Reserve Bank of Australia did not hide its attitude on lowering interest rates if necessary. The Central Bank said that we should expect a long period of low interest rates, and closely monitor the state of the labor market. The main risk to the Australian economy is the coronavirus, which continues to spread. The outbreak poses new risks not only on growth prospects, but also on the overall global economy in 2020. As a result, Moody's has revised its forecast, and lowered the probability of global GDP growth in 2020 to 2.4%.
As for the current technical picture of the AUD/USD pair, the recent attempt to grow the pair was not successful. The bears are gradually pushing the pair to the lows of last year, and this year in the area of 0.6660. Regardless, hope remains for the level of 0.6677, where a rebound from which will help build a new upward trend in the expectation of a return and break of the resistance level of 0.6765. If it succeeds, it will open a direct road to the highs of 0.6805 and 0.6880.