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EUR/USD Sinks After ECB Surprises Forex Market

September 4, 2014 by

While US economic data was very good (with the exception of the employment report), it was not the main driver for EUR/USD today. The currency pair sank after the European Central Bank cut interest rates (event A on the chart) and announced a quantitative easing program (event C on the chart). It was shock to most Forex traders who expected no change for monetary policy from the ECB. While it was widely believed that central bank would have to stimulate the European economy eventually, not many market participants expected it to act so soon.

ADP employment demonstrated an increase by 204k in August, trailing analysts’ expectations of 218k and the previous month’s value of 212k. (Event B on the chart.)

US trade balance posted a deficit of $40.5 billion in July. The reading was near the previous figure of $40.8 billion, while analysts predicted a noticeable increase to $42.5 billion. (Event C on the chart.)

Initial jobless claims were at 302k last week — a small increase from the previous week’s 298k. Experts have anticipated no change. (Event C on the chart.)

Nonfarm productivity was at the 2.3% annual rate during Q2 2014, while economists believed that it would stay at the previous level of 2.5%. (Event C on the chart.)

ISM services PMI rose from 58.7% to 59.6% in August instead of falling to 57.3% as was predicted by experts. (Event D on the chart.)

Crude oil inventories decreased by 0.9 million barrels last week, matching forecast exactly, but remained in the upper half of the average range for this time of year. Stockpiles shrank by 2.1 million last week. Total motor gasoline inventories decreased by 2.3 million barrels and are in the middle of the average range. (Event E on the chart.)

Yesterday, a report on factory orders was released, showing growth by 10.5% in July. The actual change was far above the June’s 1.5% (revised up from 1.1%) but somewhat below the expected 10.9%. (Not shown on the chart.)

EUR/USD for 2014-09-04

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