The Federal Reserve Bank announced a surprise 50 basis point rate cut yesterday. The cut comes after Jerome Powell announced last week that the central bank will be ready to act if need be.
The surprise measure taken by the central bank also followed a rate cut on the same day by the RBA.
Elsewhere, the G7 summit disappointed the markets after investors saw no major commitments from the leaders.
Eurozone Flash Inflation Slips in February
The preliminary flash inflation estimates for the Eurozone saw a decline in consumer prices. Data showed that headline inflation rose at a slower pace of 1.2% compared to a 1.4% increase in the month before.
The core inflation rate, however, was steady at 1.2%, rising only slightly from 1.1% earlier.
EURUSD Maintains its Bullish Streak
The common currency is consolidating within the resistance level of 1.1193 – 1.1176 and the support level of 1.1100. Price action remains bullish as the Stochastics oscillator remains in the overbought levels.
The bullish momentum could see a breakout from one of the levels in the near term.
UK Construction PMI Rebounds to Expansion
Construction activity in the United Kingdom grew faster than expected. Data from IHS Markit showed that the UK’s construction activity rose to 52.6 from 48.4 in January.
This marks a return to the expansion levels. Most of the UK’s business activity has been picking up following Brexit on January 31st.
GBPUSD Drifts Below Support Level
GBPUSD is trading rather flat with price action somewhat subdued. We anticipate a short term rebound to the support level of 1.2858. A retest of this level will confirm this as resistance. However, in the event of a breakout, price action could resume the upside bias.
Gold Remains Volatile as Investors Consider G7 Outcome
The precious metal remains volatile, trading near the recent highs. Price action is reflecting the current market volatility due to the coronavirus. The G7 failed to give any commitments to stimulus.
Furthermore, the surprise Fed rate cut has also added to the volatility in the precious metal.
XAUUSD Pares Losses
Gold prices are reversing the gains following the Fed’s surprise rate cut. Price action is back near the 1632 level. We expect this level to turn to resistance if there is no follow-through to the upside.
However, there is also a risk of price action trading rather flat within 1655 and 1631 levels.