US OPEN – ECB queues up cut and QE, Earnings impress, Oil, Gold and Bitcoin all rising

US stocks are popping higher on earnings and after the ECB’s dovish hold signaled they are ready to use the whole toolbox in September.  More QE and lower rates will help the eurozone and risky assets are getting a nice bump this morning.  US earnings continue to come in mixed, but some of the larger cap beats are dominating the headlines.  3M and Facebook delivered strong results.  So far roughly three out of four S&P 500 companies that have reported results have delivered strong earnings.

ECB

The ECB is ready to deliver rate cuts and launch QE2 and all options appear on the table for the September meeting.  The initial reaction saw the euro spike higher on the dovish hold, but that did not last as the groundwork was put in place for a strong dovish signal for the upcoming meetings.  The ECB decision went as expected, though some traders were disappointed they didn’t cut today.  The tweaks to forward guidance that rates could go lower and the formation of committees to look at all the tool box options, including tiering, increasing its size, and widen composition of new asset purchases.  The Draghi press conference is expected to be dovish, as we could see this be his last memorable presser. Draghi looks like he will continue on with his mantra from seven years ago that he will do whatever it takes to save the eurozone.

Oil

Oil prices are still benefiting from yesterday’s bullish EIA report, practically matching the API report we saw on Tuesday.  The strong draw of nearly 11 million barrels mostly came from the Gulf of Mexico, which was dealing with the aftermath of Tropical Storm Barry.  US production saw its biggest drop since October 2017, but it is expected to rebound strongly next week.

The demand part of the energy equation got another negative headlines as Germany’s business climate fell to the lowest level since February 2010.  Further global economic data weakness may have limited effects on crude demand as the next round of easing from the ECB, along with the Fed’s shift to an easing cycle, will help the bolster the economy.

Gold

The ECB’s signal for fresh stimulus along with growing expectations the Fed is about to unleash a series of rate cuts is going to provide gold with solid demand for the rest of the year.  Even if we see stocks continue to the climb into uncharted territory, the yellow metal seems ready to shine brighter.

Bitcoin

The largest cryptocurrency is testing the $10,000 level once again as investors see regulatory concerns start to fade.  The regulatory environment will likely squeeze out the smaller digital coins first and we could see Bitcoin in medium-term.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Ed Moya

Ed Moya

Senior Market Analyst at OANDA
With more than 20 years’ trading experience, Ed Moya is a market analyst with OANDA, producing up-to-the-minute fundamental analysis of geo-political events and monetary policies in the US, Europe, the Middle East and North Africa. Over the course of his career, he has worked with some of the world’s leading forex brokerages and research departments including Global Forex Trading, FX Solutions and Trading Advantage. Most recently he worked with TradeTheNews.com, where he provided market analysis on economic data and corporate news. Based in New York, Ed is a regular guest on several major financial television networks including BNN, CNBC, Fox Business, and Bloomberg. He is often quoted in leading print and online publications such as the Wall Street Journal and the Washington Post. He holds a BA in Economics from Rutgers University. Follow Ed on Twitter @edjmoya ‏
Ed Moya