Euro rises as Fitch downgrades Italian debt to a notch above junk
The US dollar index declined today as the market waited for the Federal Reserve and Q1 GDP data. The Fed is expected to leave interest rates unchanged at the current range of between 0% and 0.25%. Traders will watch for three key things in the statement. First, they will want to know how long the rates will remain low. The bank could say that it will leave rates at the current level as long as it is necessary. Second, they will want to see whether the bank will take action to cushion the economy. Finally, they will lookout for a statement about the balance sheet, which has been expanding at the fastest pace on record. Meanwhile, analysts expect the US economy to have declined by 4% in the first quarter.
The euro rose slightly in overnight trading as traders reacted to the Italian credit rate cut. In a statement yesterday, Fitch downgraded the country to a single notch above junk status. The agency said that the current pandemic will increase doubts about the sustainability of the country’s debt. The agency said that the country’s debt to GDP ratio would increase to about 156%. This decision came a few days after S&P Global Ratings held its rating at BBB. On the other hand, Moody’s has left Italian debt a single notch above junk status. We will receive the German import price index and the eurozone’s business confidence data.
The Australian dollar continued to rise as investors reacted to the country’s inflation data. In the first quarter, the headline consumer prices rose by 0.3%. This was lower than the previous quarter’s rate of 0.7%. Still, it was better than the consensus estimates of 0.2%. The prices rose by an annualised rate of 2.2%. The trimmed mean CPI rose by 1.8% while the weighted mean CPI rose by 1.7% in the quarter. Meanwhile, in New Zealand, the trade surplus rose to $672 million in March as both exports and imports increased.
The AUD/USD relentless rally continued in overnight trading. The pair reached an intraday high of 0.6527, which is the highest it has been since March 13. The price is above the short and medium-term moving averages. Also, it has moved above the important 23.6% Fibonacci retracement level. Therefore, this means that the pair will likely continue rising today as bulls attempt to reach the next resistance level at 0.6550.
The EUR/USD pair bounced back after the Italian credit downgrade. It reached an intraday high of 1.0853, which was slightly higher than yesterday’s low of 1.0815. On the hourly chart, this price is above the 14-day and 28-day exponential moving averages. The price is also slightly below yesterday’s high of 1.0890. The bullish trend will likely continue today as long as the price remains above the 28-day EMA at 1.0835.
The USD/JPY pair declined to an intraday low of 106.53, which is the lowest it has been since March 18. The price has been on a strong downward trend since peaking at 111.70 on March 24. It is also slightly above the 50% Fibonacci retracement level and below the short and medium-term moving averages. The pair will likely continue moving lower as bears attempt to move below the 50% retracement at 106.40.