HotForex Forex News

23:41 Wall Street ambivalent amid mixed signals from FOMC members

As the first-quarter earning reports are approaching, major US equity indices painted a mixed picture on Wednesday amid varied messages from FOMC members.

While the Chicago Fed President Charles Evans supported another one or two increases this year, suggesting even a temporary 2.5% inflation would be in line with Fed's forecasts, Boston Federal Reserve President Eric Rosengren and San Francisco Fed President John Williams both expressed their concerns over the risks involved with a more rapid tightening of monetary policy. However, unlike Evans, Williams and Rosengren are non-voters. 

Forex today: Aussie leads, US yields drop but dollar robust on Fed speak

U.S. crude futures jumped above $49, recording a daily gain of more than 2% on Wednesday as the Energy Information Administration (EIA) reported that crude inventories increased 867,000 barrels last week, below the expectation of 1.183 million. Led by oil prices, the S&P 500 energy sector .SPNY rose 1.2%. Following the data, "time is beginning to run out for further large crude inventory builds before the usual second-half of April start of seasonal crude draws," Standard Chartered said in a note, suggesting further stock drops in coming weeks.

According to a recent Reuters poll, the post-election stock rally may have reached its limit. Based on the median forecast of over 40 strategists, the S&P 500 will hit 2,355 by mid-2017 and finish the year at 2,425, just 2.8 percent above where the index closed on Tuesday but up about 8 percent from 2016.

The Dow Jones Industrial Average lost 42.18 points, or 0.2%, to 20,659.32, the S&P 500 buoyed by energy shares, gained 5.25 points, or 0.22%, to 2,356.75 and the Nasdaq Composite added 22.41 points, or 0.36%, to 5,897.55.

Headlines from the U.S. session

  • Fed's Williams: Growing U.S. wealth-to-income ratio another reason to keep raising rates
  • UK PM May: Looking for reciprocal arrangement with the European Union
  • Important to avoid an overheated economy - Fed's Rosengren
  • European stocks recover as UK triggers Brexit
  • OPEC March oil output falls 230,000 bpd month/month - Reuters
  • Fed's Evans on 2017 rate hikes: two are very safe, three could also happen but four would need better fundamentals
  • US Dollar accelerates the upside near 100.00

 

 


23:20 Forex today: Aussie leads, US yields drop but dollar robust on Fed speak

The FX space was a mixed bag today, with yields falling and the dollar unable to hold onto gains through the 100 handle in the DXY. 

There were some rogue plays out there today, with the Aussie continuing with its northerly trajectory along with the kiwi and the CAD playing catch up in dramatic style. Iron ore picked up again from the lows seen earlier in the week, continuing to recover and support the Aussie. UK's PM May triggered Article 50 and USD/JPY was capped due to a turn in yields following German 10yr yields that lead the way dropping from 0.42% to 0.34%.

US yields drop but dollar holds in there

The benchmark US 10yr treasury yields fell from 2.43% to 2.38%. The European yields dropped in such a fashion due to the headlines suggesting that the ECB's message at its March 9 meeting has been overinterpreted as too hawkish. Meanwhile, Fed fund futures yields continued to price around a 60% chance of the next hike occurring in June, supporting the dollar to some extent. We had Fed-speakers hawking it up though, with Williams, Rosengren and Evans all citing the possibility of four hikes in total in 2017 - However, the markets are not buying it if price action is anything to go by. The US dollar was robust but did not exactly take off and settles below the 100 mark on the DXY. From the data, US pending home sales was higher to 5.5% in Feb vs 2.5% expected. 

The day ahead:

Analysts at Westpac offered the key events for the day ahead:

"US: Fedspeak involves Kaplan participating in a moderated discussion at a capital markets summit in Washington D.C, Mester speaks at a risk conference co-hosted by the Chicago Fed, and Williams speaks at a community event in New York. Q4 GDP third estimate is out. Expectations are for a revision up to 2.0%yr from the second estimate of 1.9%yr.

Eurozone: Mar economic confidence and business climate survey indicators are released. Both measures rose over 2016 on stronger activity and remain around current cyclical highs but below previous cycle’s peaks.

Germany: Mar CPI last came in at 2.2%yr in line with the broader Eurozone. However, CPI ex energy printed 1.7%yr versus Eurozone core CPI of 0.9%yr. The reaction from German leaders has so far been tepid, but a further continuation in divergence could cause greater conflict with ECB policy."

Top stories from US session:

  • GBP/USD marching towards a positive daily close
  • AUD/USD marches on with 0.7740/78 resistance up ahead through 0.77 handle
  • Fed's Williams: Growing U.S. wealth-to-income ratio another reason to keep raising rates
  • UK PM May: Looking for reciprocal arrangement with the European Union
  • EUR/GBP headed to parity longer term?
  • Intermarket VIX: a safe ride for risk-on markets, or is it?
  • USD/JPY rises back toward 111.00 despite negative tone in Wall Street

 

 

 


22:28 GBP/USD marching towards a positive daily close

Following a fall to 1.2375 during the European session, the GBP/USD recovered towards the mid 1.24 area as we approach the end of the trading day. At the moment, the pair is at 1.2437, 20 pips above yesterday's closing level.

Brexit is officially here

Other than the initial fluctuation, markets didn't show a significant reaction to the official commencement of Brexit, as the UK triggered the Article 50 of Lisbon Treaty. Although UK's Prime Minister Theresa May stated that the future relationship with the EU will be different, but will offer the same trade benefits, in her statements later during the NA session, the negotiations are poised to be problematic. Earlier today, a leaked copy of the European parliament's resolution document suggested that the EU is not willing to make any free trade arrangements for the next two years.

UK PM May: Looking for reciprocal arrangement with the European Union

What's next for FOMC?

After yesterday's strong rally, the US dollar index continued to edge higher on Wednesday amid optimistic statements from FOMC members. While Boston Federal Reserve President Eric Rosengren suggested that the U.S. central bank should raise rates at every other FOMC meeting, San Francisco Fed President John Williams pointed out to growing U.S. wealth-to-income ratio as another reason to keep raising rates.

Fed's Williams lauds recovery, sees 3 or more hikes this year - Reuters

Technical outlook 

A break above 1.2450 (Fib. 61.8% of Dec/Jan drop) could allow an extension towards 1.25 (psychological level) and 1.2560 (Mar. 27 high). On the downside, the first technical support is located at 1.2405/10 (50-DMA/100-DMA) followed by 1.2340 (Mar. 21 low/20-DMA) and 1.2300 (psychological level).


22:27 AUD/NZD: well supported at 1.0800 for an attempt at 1.1000 - Westpac

Analysts at Westpac offered their outlook for AUD/NZD and the antipodean crosses.

Key Quotes:

"AUD/NZD 1 day: Well supported at 1.0800 for an attempt on 1.1000 during the days ahead.

AUD/NZD 1-3 month: Higher to 1.10+. The cross remains well below fair value estimates implied by interest rates, commodity prices and risk sentiment, although is closing the gap (6 Mar).

AU swap yields 1 day: The 3yr and 10yr should open around 2.07% and 2.95%, respectively.

AU swap yields 1-3 month: The 3yr has probably based at 1.60%, the RBA expected to sit tight at a 1.5% cash rate for some time. (7 Nov)

NZ swap yields 1 day: NZ 2yr swap rates should open unchanged at 2.33%, the 10yr down 2bp at 3.44%.

NZ swap yields 1-3 month: The RBNZ said it has ended its easing cycle and will remain on hold until 2020. That will anchor the short end, although markets will not abandon their expectations for earlier tightening which means occasional spikes in the 2yr will be likely. The long end will continue to follow mainly US yields, which we expect to rise. That means the curve steepening trend should continue. (17 Feb)"


22:10 AUD/USD marches on with 0.7740/78 resistance up ahead through 0.77 handle

Currently, AUD/USD is trading at 0.7672, up 0.51% on the day, having posted a daily high at 0.7676 and low at 0.7631.

AUD/USD remains better bid in the upper end of the 0.76 handle en-route to 0.7680 and 22nd March highs. The risk tone is positive again today and that is aiding the Aussie along with a continuation of iron ore prices in a recovery of the lows this month with Iron Ore 62% Fe CFR April 2017 (NYMEX) highs of 81.92 from 79.40 lows on the 27th March. 

Gold remains in a tight range around $1250

There are concerns about house prices and mortgage debt from the RBA that should keep the RBA on hold for the foreseeable future and that too underpins strength in the Aussie. However, it will not be too long before any significant advances in the Aussie will raise the concern about how it will damage the Aussie economy and entice the RBA to intervene one way or another. However, for the time being, risk is on and higher yields will support AUD/JPY and underpin the Aussie on the front foot. 

Intermarket VIX: a safe ride for risk-on markets, or is it?

AUD/USD levels

AUD/USD targets the 0.7740/78 resistance levels made up from the February and November 8th highs. The April 2016 high at 0.7836 would then be next in focus on a break of the 0.7778/0.7850 2016 highs and the 38.2% retracement. 0.7850  guards the 200-month ma at 0.7940. To the downside, the key support area of interest is 0.7548 and the 200 day ma.
 


21:57 Fed s Williams: Growing U.S. wealth-to-income ratio another reason to keep raising rates

San Francisco Fed President John Williams responded to questions from the press following his speech at an economists' club in New York.

Key quotes (via Reuters)

  • Fed's current 'floor' policy method works effectively with use of repo, excess reserves rates
  • Key risk in trimming bond portfolio is removing economic stimulus too quickly
  • I see 2-3 more rate hikes this year; upside risks more prominent
  • Recent decline in U.S. C&I loans not worrisome; demand for credit has not slowed
  • U.S. tax reform is very complex, another reason not to presume immediate fiscal stimulus
  • Much of dollar rise due to strength of U.S. relative to other economies
  • Growing U.S. wealth-to-income ratio another reason to keep raising rates

21:47 Macron to win the French elections - Elabe poll - Reuters

According to the latest poll conducted by Elabe on March 28-29, Macron, a popular independent who served as economy minister under President Francois Hollande, would win 25.5 percent of the vote in the April 23 first round while Le Pen would get 24 percent, as reported by Reuters.

  • Both of their scores were down 0.5 percentage points from the last time the poll was conducted a week ago
  • The poll also showed that conservative Francois Fillon's score rose to 18 percent from 17 percent

21:34 USD/CAD breaks below 1.3350 and falls to 2-day lows

USD/CAD broke below 1.3355 and accelerated to the downside during the last two hours amid a decline o th US dollar against commodity currencies and a recovery in crude oil prices. 

The greenback, remains strong and in positive territory against European currencies and also the yen but is losing ground versus commodity currencies. The WTI barrel is up 2% and recently printed fresh highs at $49.40. 

USD/CAD dropped to 1.3329, hitting a 2-day low. Price remains near the lows with a negative tone and moving toward weekly lows located at 1.3315. From yesterday’s closing price is down 40 pips. 

Technical levels

If it continues to slide, potential support levels might lie at 1.3315/20 (Mar 23 & 27 low), 1.3275 (Mar 16 low) and 1.3260 (Mar 21 low). On the flip side, resistance could be seen at 1.3350/55 (Mar 28 low / Asian session low), 1.3400 (daily high) and 1.3420 (Mar 10 low). 

USD/CAD


21:29 UK PM May: Looking for reciprocal arrangement with the European Union

UK Prime Minister Theresa May is hitting the wires last minutes, via Reuters, stating that she's looking for reciprocal arrangement with the European Union. "The future relantionship with the EU will be different, but will offer the same trade benefits", May added.


21:25 EUR/GBP headed to parity longer term?

Currently, EUR/GBP is trading at 0.8658, down -0.30% on the day, having posted a daily high at 0.8739 and low at 0.8624.

  • EUR/USD: technically back below bullish conditions, target 55-day ma at 1.0674?

EUR/GBP has reversed the recent spike onto the 0.87 handle that put the cross back into bullish territory within the longer term bullish trend. On the wide, some economists are looking at the 0.90 handle which reminds us that the cross was at 0.9229 highs not that long ago, relatively speaking back in the end of Sep 2016. 

'Where the pound goes now depends, to a very large degree, on economic data," explained Kit Juckes, an economist at Societe Generale. "The political shock is surely mostly priced in. But the danger is that the economy slows even as the UK has a sticky inflation rate. We remain bullish of EUR/GBP over the medium term. The dangers to that trade, French politics and UK economic resilience, both seem smaller than the likelihood we have a serious look at parity between the pound and the euro in the years ahead."

  • Pound not at the mercy of Brexit negotiations; Look at correlations to trade the GBP

EUR/GBP levels

Analysts at Commerzbank's near-term outlook for EUR/GBP is neutral to slightly positive: "The market continues to find near-term support circa the 55-day ma at 0.8603. Initial resistance lies at 0.8728 and .8771 (downtrends) and we suspect that this will cap for now. Above 0.8800, there is scope to tackle the 0.8852 January high. We look for the downside currently to be limited by the 200-day ma at 0.8571. Where are we wrong? Market is now bid above the 0.8581 200 day ma. Failure here will re-target the 0.8401 February low."


20:57 USD/MXN drops to fresh 4-month lows ahead of Banxico

The Mexican peso is among the top performers on Wednesday in the currency market ahead of tomorrow’s Bank of Mexico meeting. USD/MXN is falling almost 1.50% today. The pair traded momentarily above 19.00 earlier today but then bounced to the downside. Recently reached 18.73, hitting the lowest level since the US Presidential elections (Nov 8/9). 

Currently, it trades at 18.74, headed toward the lowest close in months. The bearish tone prevails in the pair, that since mid-March accelerated the downside, following the break of the 19.40 technical barrier. 

Banxico eyed

On Thursday, most analysts expect Banxico to raise rates by 25 basis points. Rising inflation pushed the central bank to start a tightening cycle. Some analysts expect no move tomorrow taking into account that the peso has strengthened since January. Back then USD/MXN reached record highs levels on top of 22.00. 

Analysts from TDS, expect a 25bp rate hike but they do not discount the possibility that Banxico would elect to not hike rates. “Though we believe this is ill-advised as it would be better policy execution and communication strategy (that would enhance market confidence) to hike 25bps more, and then change the communication strategy to indicate an end (or near to an end) in the hiking cycle”.

Banxico seen raising rates by 25 bp – TDS

USD/MXN


20:25 Fed s Williams lauds recovery, sees 3 or more hikes this year - Reuters

"Lifting rates gradually prevents the economy from overheating... I would not rule out more than three increases total for this year," said San Francisco Fed President John Williams in a speech at an economists' club in New York.

Key quotes (via Reuters)

  • U.S. rate hikes needed to avoid overheating
  • Largely attained hard-fought economic recovery
  • Slow labor growth, productivity main impediment to GDP growth
  • Such supply-side impediments largely outside Fed policy purview
  • Williams expects to hit 2 pct inflation goal in next year or so
  • Williams expects roughly 1.75 pct GDP growth this year and next

20:20 EUR/USD: technically back below bullish conditions, target 55-day ma at 1.0674?

Currently, EUR/USD is trading at 1.0753, down -0.56% on the day, having posted a daily high at 1.0828 and low at 1.0740.

EUR/USD is consolidating the recent drop from the 1.09 handle from the start of this week targeting the 200 smoothed sma at 1.0735. While there were headlines suggesting that the ECB's message at its March 9 meeting has been overinterpreted by the markets as a step to exit, the negotiations between the EU and Brexit are also due to start now that PM May triggered Article 50. This is potentially a far greater risk over the medium term weighing on the euro with much of the downside in sterling already priced in. EUR/GBP has reversed its gains on the 0.87 handle and has dropped to 0.8623 lows today.

EUR/USD near-term risks

In the near term and within a month, the French elections will take the limelight. however, it is unlikely that LePen will win, but NOT impossible should the 35% of those who are yet to vote to decide to come forward in the second round and do a Brexit/Trump style ambush on the status quo. Given Le Pens anti-EU and euro campaign, that could seriously hurt the euro on such headlines.

  • Opinionway Poll: Macron/ Le Pen now 64/36 in 2nd round
  • Can Le Pen still win? - Nomura

With an improved risk sentiment in markets, for now, the dollar is outperforming the euro as yields move up and stock markets rally. The GOP this week confirmed their commitment to tax reform and that has fueled a bullish scenario for US markets once again, supporting a bid in the greenback. 

  • Intermarket VIX: a safe ride for risk-on markets, or is it?

EUR/USD levels

On a technical basis, the bullish case has neutralized while the euro failed to close 1.0877 200 day moving average. With this break below the 1.08-handle there are mounting risks to the downside. "Below 1.0760 will alleviate immediate upside pressure and trigger a slide back to the 55-day ma at 1.0674," explained analysts at Commerzbank. 


20:18 Gold remains in a tight range around $1250

Since breaking above the 200-DMA at the end of last week,  the precious metal is having a difficult time setting a near-term direction. On Wednesday, the metal wavered in a $7 range with the daily high at $1254 and low at $1247. As of writing, the XAU/USD is at $1252.20, just 15 cents above yesterday's closing price.

Although the US dollar index is advancing for the second day in a row, Wall Street's mixed outlook is not allowing a sharp drop. At the moment, the DXY is at 99.90 recording a 0.38% daily gain. Peter Spina, president and chief executive officer of GoldSeek.com, noted that there is a bit of a battle under way as to where we are heading next.

On Wednesday, the UK government formally started the Brexit process by triggering Article 50 of Lisbon Treaty. The rocky Brexit road ahead coupled with the uncertainty within the EU politics could hurt Euro's appeal, making the greenback a more desirable alternative. However, Gold could continue to attract the investors as a safe haven, making it harder to forecast the next direction for the XAU/USD.

Technical outlook

The yellow metal is facing the first hurdle at $1258 (Mar. 28 high) ahead of $1261 (Mar. 27 high) and $1264 (Feb. 27 high). On the downside, with a drop below $1247 (200-DMA), $1235 (Mar. 20 high) and $1231 (50-DMA) could be targeted.

 


20:05 United States 7-Year Note Auction climbed from previous 2.197% to 2.215%


19:58 USD/CAD trailing its commodity counterparts on BoC / Fed divergences?

Currently, USD/CAD is trading at 1.3371, down -0.08% on the day, having posted a daily high at 1.3403 and low at 1.3354.

Despite the spike in WTI, the Candian dollar remains subdued within its bullish drift this week while its commodity-linked counterparts such as the Aussie outperform.  AUD/CAD has risen from 1.0153 to 1.0250 this week so far. We await Friday’s GDP and next week’s Business Outlook Survey as the next catalyst but yesterday's comments from the BoC Gov. Poloz saw a reiteration of prior concerns with a focus on downside risks, excess capacity, and expectations for policy divergence between a tightening Fed and a neutral BoC, as noted by analysts at Scotiabank. "The next BoC policy decision (and MPR forecast update) is now two weeks away, and we see downside risk to CAD as we look to an extension of the anticipated closing of the output gap (currently expected mid-2018)."

  • Intermarket VIX: a safe ride for risk-on markets, or is it?

USD/CAD levels

The analysts at Scotiabank are neutral-bullish on the short-term outlook: "Momentum signals are remarkably muted with near-neutral momentum indicators and a trendless (sub- 25) ADX at 15. The post-Fed path has seen a sequence of higher lows and higher highs, pushing above 1.34 toward the crucial 1.3420 level. We look to further gains toward 1.3450 and the early March high in the mid-1.35s. Support is expected in the 1.3320-1.3350 area."

 


19:44 Important to avoid an overheated economy - Fed s Rosengren

Boston Fed President Eric Rosengren spoke to the Boston Economic Club and Boston Fed staff at the Federal Reserve Bank of Boston with top takeaways from his speech below:

  • Unsure of future of US fiscal policy
  • Recent economic reports have been consistent with continued steady improvement in the economy
  • I believe it is likely to be appropriate for the FOMC to raise rates at a more regular – though still gradual – pace
  • It is important to avoid creating an over-hot economy that could require a more rapid tightening of monetary policy

19:36 Can Le Pen still win? - Nomura

Analysts at Nomura explained that their base case remains that, according to current polls, Emmanuel Macron will win the French presidential elections. 

Key Quotes:

"It is still mathematically feasible for Marine Le Pen to win the presidency, but this relies on the hypothesis that those who intend to abstain, offer a blank vote or who are still undecided vote for her in the second round."

"This looks highly unlikely, as many of those voters choose to abstain or to vote blank in protest against the political system."

"With less than a month before the first round, she will need to narrow Emmanuel Macron’s lead in the second round polls if she wants to increase her chance of winning."

"Nevertheless, with about 35% of voters still not committed to any candidate, there is still a probability, albeit diminished, that Ms Le Pen could win."


19:28 European stocks recover as UK triggers Brexit

European stocks closed the day higher for a second straight session, as investors didn't pay much attention to the official beginning of the U.K.’s negotiations to leave the European Union.

Rather than Brexit, oil prices were tracked closely by the investors as the EIA inventory report showed that the U.S. crude stockpiles rose less than forecast, allowing oil to extend its gains. Energy shares led the way in the Euro Stoxx 600 with a daily gain of more than 0.8%. During the month of March, the Stoxx 600 index showed its best performance since 2010, gaining about 2.2%.

The FTSE 100, after dropping 0.3%, closed the day at 7.373,50, up 0.39%. Germany’s DAX 30 index gained 59 points, or 0.5% to end the day at 12.208.50.

 


19:18 Intermarket VIX: a safe ride for risk-on markets, or is it?

One of the bets that we had at the start of this year was to buy the VIX; It was sure to be a wild ride in 2017.

Fundamentally, we are living through Trump's first 100 days and that certainly has given volatility a boost at times. However, the standard gauge of fear in the market, aka, the short-term implied equity volatility (the VIX) had been at 18-month lows at the start of his term.  That could have reflected a sign of stability and confidence in his presidency and a boost for the equity market. Indeed, US stocks rocketed higher post-election, corporate earnings rebounded and global growth was expected to increase. Or, has something else been going on - because it certainly has felt very volatile out there at times even though the VIX has been at historical lows? 

Pound not at the mercy of Brexit negotiations; Look at correlations to trade the GBP

We have also been anchoring ourselves to the Fed and each and every comment coming from Fed officials let alone the Fed meetings; again, there has been some volatility but the VIX has not been showing us a great deal around those events. Then, just today, the British Government's decision to trigger Article 50 might have given the markets some volatility and a rise int he VIX but ... no, it hasn't! Both the VIX, and Deutsche Bank's CVIX FX volatility index, are back below their 50, 100 and 200-day moving averages as Kit Juckes, an economist at Societe Generale points out.

Juckes notes that the excitement we have seen of late was caused by the failure of President Trump's healthcare bill, but this has been washed away as bond yields stabilise. "A 2.42% 10-year Note yield is neither too hot nor too cold, consistent with a couple more rate hikes this year but not with the Fed's famous dots that take rates to 3% in due course. Rates stay below the nominal growth rate of the economy and asset prices take comfort."

Juckes also explained that both the dampening effect on volatility and the over-correlation of financial markets that Helene Rey blamed on too-low rates in her "Trilemma" are back as the dominant force behind markets. "In FX, that's a recipe for yield-hungry, risk-tolerant investors to take the lead."

However, on further analyses, what we also must be mindful of is how the VIX correlates to the S&P 500. It completely depends on the performance of individual stocks within the index. For example, when all stocks in the index are in a bullish trend or in a bearish trend, the inter-correlation of the index is either high or positive. When we have rogue performances from individual stocks or sectors, as we have seen a lot recently in energy and financials, for example, correlation is said to be low, or negative. So, when all stocks go up 3%, the index goes up 3% and vice-versa. Therefore, price changes in the index may not accurately reflect changes in the underlying companies and hence this may explain the low performance in the VIX even when it feels volatile out there.

USD/JPY rises back toward 111.00 despite negative tone in Wall Street

The turbulence that we have seen this year has been more sector related in the index and has not affected the market as a whole to the same extent as previous years in 2015 and 2016 for example. In fact, the ratio of realized volatility at the sector level to the broad index is the highest in 5 years. 

What is more concerning is that the low level of the VIX indicates limited demand for downside protection. While investors continue to ride the tide all the way out, that tide will eventually have to come back in. With the number of concerns over the GOP, the US debt ceiling and possible government shut-down as soon as this June, when they run out of money, the Trump trade could take a serious hit. Risk-on FX maybe shelved very suddenly with some hard landings out there. This could be a positive environment for emerging market currencies such as the ZAR should China continue to perform in a more politically stable and growing South African economy while the dollar takes the brunt of it all. 


18:57 US Pending home sales: Broad-based strength - Wells Fargo

According to analysts from Wells Fargo, the pending home sales report (+5.5% in February) showed broad-based strength in sales. 

Key Quotes: 

“Pending home sales bounced back a robust 5.5 percent in February, as contract signings rose in all regions. Mortgage purchase applications are also rising. The positive reports bode well for home sales this spring.”

“Strength in contract signings was broad-based, as all regions posted a gain on the month. Notably, pending home sales in the Midwest surged 11.4 percent, ending a three month string of declines. The South also saw a solid increase of 4.3 percent.”

“The resurgence in pending sales was likely influenced by unusually mild winter weather, which boosted contract signings in the Midwest. Weather provided less help in the West, where sales are being held back by exceptionally tight inventories.”


18:53 USD/JPY rises back toward 111.00 despite negative tone in Wall Street

The US dollar managed to move off daily lows against the Japanese yen despite the decline in US bond yields and also as the Dow Jones falls 0.35%. The yen moved off daily highs in the currency market in a risk-off environment. 

USD/JPY bottomed earlier at 110.70 and then bounced at a slow pace. Currently is hovering around 111.00, practically unchanged for the day. 

Volatility in the forex market eased during he last hours and majors have been moving in minor ranges, including USD/JPY.  The formal Brexit start and several statements from Federal Reserve officials did not have a large impact on financial markets. 

There should be an increase at 'every other' FOMC meeting - Fed's Rosengren

Fed's Evans on 2017 rate hikes: two are very safe, three could also happen but four would need better fundamentals

Technical levels

To the upside, resistance levels might be located at 111.05/10 (20-hour moving average), 111.30 (daily high) and 111.55 (Mar 23 high). On the flip side, support could be seen at 110.70/75 (daily low), 110.40 (intraday) and 110.00/10 (psychological/weekly low).

USD/JPY


18:49 OPEC March oil output falls 230,000 bpd month/month - Reuters

According to a recent survey by Reuters, output from all 13 members of the Organization of the Petroleum Exporting Countries fell by 230,000 bpd in March from February's revised level.

  • February's production was revised up by 50,000 bpd because Saudi output was higher than originally thought, while Nigerian production was lower
  • Oil supply-cut targets achieve 95 pct of pledged reductions in march (original feb compliance estimate 94 pct)

18:38 There should be an increase at every other FOMC meeting - Fed s Rosengren

Boston Federal Reserve President Eric Rosengren is crossing the wires, via Reuters, saying that he thinks the U.S. central bank should raise interest rates three more times this year due to the strength of the economy.

Key quotes

  • I see a further three interest rate increases this year
  • There should be an increase at 'every other' FOMC meeting
  • It's likely that full employment and 2 pct inflation will be reached by end of the year
  • I see that as consistent with Fed's 'gradual' path

18:24 GBP/USD bounces back above 1.24

The GBP/USD pair stayed in a 100 pip range on the day of Brexit. After leaping to 1.2475 during the European session, the pair came under renewed selling pressure and dropped to its daily low at 1.2375. As of writing, the pair was down 0.15% at 1.2430.

Article 50 triggered

Although the pair gained some upward momentum after UK's PM Theresa May officially triggered Article 50 by giving the letter to Donald Tusk, President of the European Council, it struggled to extend this move. The heavy sell-off witnessed in the EUR/USD following some ECB headlines suggesting a less likelihood of monetary tightening at the end of the year, allowed the greenback to rally against its other European counterparts as well.

Furthermore, a leaked copy of the European parliament's resolution document showed that there wouldn't be any free trade arrangements with Britain in the next two years. UK's Society of Manufacturers and Traders quickly responded by stating that this was the most significant threat to the competitiveness of the UK automotive sector in a generation. 

Donald Tusk Press Conference UK Notification - Brexit Reaction Statement

The greenback also received an additional boost from the positive data from the United States, which showed that Pending Home Sales Index jumped to its highest level since April at 112.3. During the remainder of the NA session, markets will be keeping a close eye on speeches by Boston Fed E.Rosengren (2019 voter, dovish) and San Francisco Fed J.Williams (2018 voter, centrist).

Technical outlook

The first support for the pair is aligned at 1.2405/10 (50-DMA/100-DMA) followed by 1.2340 (Mar. 21 low/20-DMA) and 1.2300 (psychological level). On the upside, a break above 1.2450 (Fib. 61.8% of Dec/Jan drop) could extend towards 1.25 (psychological level) and 1.2560 (Mar. 27 high).


18:16 Fed s Evans on 2017 rate hikes: two are very safe, three could also happen but four would need better fundamentals

Chicago Fed's President Charles Evans is crossing the wires, via Reuters, saying that 2 rate hikes this year very safe, 3 could also happen but 4 would need even better fundamentals.

Key headlines (via Reuters):

  • Big fiscal stimulus not needed but infrastructure spending would be good
  • Says not more pessimistic than others but thinks u.s. could build more of an inflation "buffer"

18:11 EUR/JPY drops to 119.00, 4-week lows

The euro fell across the board after reports signaled that European Central Bank policymakers were wary about a potential surge in yields. EUR/JPY tumbled to 119.00 and currently trades at 119.30, 80 pips below yesterday’s closing price. 

The pair is holding below last week lows and under the 119.50 support zone. The bearish tone prevails from a technical perspective, particularly after the recent slide. 

Recent movements represent also an important reversal. Earlier today it rose above the 120.30 zone, hitting at 120.43, the highest level in week, and then bounced sharply. In a few hours, the pair was rejected from above a resistance zone and tumbled breaking the 119.50 barrier. 

The pair is suffering the biggest daily decline in more than a month. If it breaks below 119.00, attention would turn to 2017 lows, that lie at 118.20/25. On the opposite direction, the euro needs to rise and hold above 119.50 in order to remove the short-term bearish pressure. 

EUR/JPY

 


17:48 WTI leaps to highs above $49.00 post-EIA

Crude oil prices have been boosted after the EIA’s weekly report on Wednesday, lifting the West Texas Intermediate to fresh daily highs beyond the $49.00 mark peer barrel.

WTI up on EIA

Prices for the WTI jumped above $49.00 after the EIA’s weekly report showed US inventories rose less than expected by nearly 0.870 million barrels during last week.

Further data saw Distillates Stocks decreasing by more than 2.4 million barrels and Gasoline Inventories dropping by almost 3.75 million barrels. In the meantime, supplies at Cushing went down by just above 0.2 million barrels.

WTI has intensified the daily upside in the wake of the report, although it has already been supported by news citing further disruptions in Libyan oil supply and the rising likeliness of an extension of the OPEC deal beyond H2 2017.

WTI levels to consider

At the moment the barrel of WTI is gaining 1.20% at $48.95 and a surpass of $49.13 (high Mar.29) would open the door to $49.36 (20-day sma) and finally $49.62 (high Mar.16). On the other hand, the immediate support aligns at $47.08 (low Mar.27) followed by $47.01 (2017 low Mar.22) and then $44.82 (low Nov.29).


17:33 US Dollar accelerates the upside near 100.00

The US Dollar Index – which measures the buck vs. its main competitors – is extending its upside momentum to the boundaries of the psychological 100.00 handle on Wednesday.

US Dollar in 6-day tops

The index managed to regain the vicinity of the critical 100.00 limestone backed by solid results from the US docket and supportive Fedspeak as of late.

In addition, news agency Reuters cited earlier in the session that markets could have misinterpreted when the ECB noted at the March meeting that tail risks were diminished, while ECB officials seem to be now worried about the potential surge in yields in EUR money markets. The news added extra oxygen to the buck’s upbeat sentiment, helping it to advance to fresh multi-day tops.

Data wise today, Pending Home Sales have surprised to the upside in February, up 5.5% MoM. Still in the US, Chicago Fed C.Evans (voter, centrist) said it would be nice if labor participants was much stronger, adding that he does not know the timing for the Fed to start reducing its balance sheet.

On the not so bright side, yields in the US money markets stay near session lows, carrying the potential to cap extra gains in DXY in the near term

US Dollar relevant levels

The index is up 0.33% at 99.86 and a break above 100.27 (high Mar.20) would target 100.64 (20-day sma)and then 101.02 (100-day sma). On the flip side, the next support aligns at 98.67 (low Mar.27) followed by 98.62 (200-day sma) and finally 98.31 (10-month support line).


17:32 Wall Street wavers after yesterday s rally

Following the biggest rally in two weeks, U.S. stocks are fluctuating during the first trading hours of the day. 

The Dow was down 40.41 points, or 0.2%, at 20,659.59, the S&P 500 was up 2.5 points, or 0.11% percent, at 2,354.00 and the Nasdaq composite was up 7.712 points, or 0.13%, at 5,882.86. According to Bloomberg, “Trump and markets are moving on, with the help of better U.S. data,” Societe Generale SA strategist Ciaran O’Hagan said referring to the recent increase in risk appetite.

The latest data from the United States showed that Pending Home Sales Index, based on contracts signed last month, increased to its highest level since April with a 5.5% gain to 112.3. Earlier during the session, Chicago Fed President Charles Evans in a conference in Frankfurt reiterated his view on one or two more hikes this year while adding that inflation could go up to 2.5% for a time and that would still be consistent with Fed's 2% goal.

Next in line are speeches by Boston Fed E.Rosengren (2019 voter, dovish) and San Francisco Fed J.Williams (2018 voter, centrist).

European shares also fluctuated on Wednesday after Britain formally triggered its exit from the European Union. After dropping as much as 0.3% on the day, the FTSE was able to recover the losses and was up 0.13% as of writing.


17:32 United States EIA Crude Oil Stocks change below forecasts (1.183M) in March 24: Actual (0.867M)


17:28 EUR/GBP falls to 0.8620, between Brexit and the ECB

EUR/GBP reversed sharply and dropped toward 0.8600. In a few hours, the pair erased weekly gains and moved closer to weekly lows. It peaked during the Asian session at 0.8734, the highest since March 16 and then bounced to the downside, falling more than a hundred pips from the top, and bottomed at 0.8622. 

Currently is hovering around 0.8650, lower for the day, but unchanged for the week, on a historic day. 

Earlier today, the UK delivered a letter to Donald Tusk, EU President, formally asking for Brexit. The pound was weak in the market but after the letter was received it gained momentum and recovered ground pushing EUR/GBP to the downside. 

The pair dropped further after Reuters reported that an ECB official mentioned that the central bank was misinterpreted regarding the possible exit strategy and sent rate hike odd for December sharply lower. The report pushed the euro to the downside across the board. 

Outlook 

EUR/GBP changed dramatically the short-term tone and now it seems under pressure. Currently is trading again close to the 0.8600/10 support area; a break lower could trigger an acceleration to the downside. 

To the upside, the pair needs to regain 0.8690 in order to remove the bearish pressure. Above that level, the key resistance continues to be 0.8725: a consolidation on top could add support for a bullish extension. 

EUR/GBP
 


17:09 USD/JPY could have carved a short-term low UOB

In light of the recent price action, USD/JPY could have bottomed out near the 110.00 handle, suggested FX Strategists at UOB Group.

Key Quotes

“The major 110.00 support continues to hold as USD rebounded strongly from a low of 110.15. Further extension towards 111.50 seems likely but this is a strong resistance and a sustained break above this level seems unlikely for now. Support is at 110.75 followed by 110.40”.

“The key 110.00 support continues to hold as USD rebounded strongly from a low of 110.15. The recent downward pressure has eased but USD has to move above 111.50 to indicate that a short-term low is in place. In other words, it is too early to expect a sustained recovery even though on the converse, the odds for a break below 110.00 have diminished considerably”.

 

 


17:07 Fed s Evans support another one or two increases this year

An improved outlook for inflation and a drop in the U.S. jobless rate to 4.7 percent, near what many economists see as full employment, help explain "why my current dual mandate outlook allows me to support another one or two increases this year," Chicago Fed President Charles Evans said in remarks prepared for delivery at the DZ Bank-OMFIF International Capital Markets Conference in Frankfurt.

Key quotes

  • For the first time in quite a while, I see more notable upside risks to growth
  • A sturdier economy would be able to handle a steeper path of rate increases
  • Even inflation of 2.5 percent "for a time" would be consistent with the Fed's 2 percent goal
  • We all certainly would like to have a surge in sustainable growth to the 3 to 4 percent range
  • Odds of achieving such large gains in the current demographic and economic environment seem to be pretty low
  • The precise details of any final legislation remain unclear, so it’s difficult to evaluate their potential implications
  • Tthe general thinking is that such policies could boost growth for a time

17:05 United States Pending Home Sales (YoY) up to 2.6% in February from previous 0.4%


17:02 United States Pending Home Sales (MoM) above forecasts (2.1%) in February: Actual (5.5%)


16:50 USD/CHF holding on to gains above 200-DMA

After breaking above the significant 200-DMA resistance, the USD/CHF  jumped to its new daily high at 0.9975 during the early trading hours of the NA session. Despite a pullback, the pair is poised to extend its rise as the US Dollar Index continues to preserve its bullish momentum.

As of writing, the USD/CHF was up 0.3% at 0.9955 while the DXY gained 0.35% to 99.90. After yesterday's impressive recovery, major US stock indexes started the day with losses hurting the risk appetite and helping the safe-haven CHF limit its losses for now.

On Wednesday, Chicago Federal Reserve President Charles Evans once again said that he supports one or two more rate hikes this year based on the progression towards Fed's goals. During the remaining of the session, Pending Home Sales are due along with speeches by Boston Fed E.Rosengren (2019 voter, dovish) and San Francisco Fed J.Williams (2018 voter, centrist). However, the general market sentiment and the greenback performance should remain as the primary drivers of the price action.

Technical outlook

The first technical resistance for the pair is aligned at 1.0000 (psychological level) followed by 1.0075 (100-DMA) and 1.0140 (horizontal level). On the downside, with a break below 0.9950 (200-DMA), the pair could target 0.99 (psychological level) followed by 0.9830 (Mar. 28 low).

 


16:28 Donald Tusk Press Conference UK Notification - Brexit Reaction Statement

President of European Council Donald Tusk gave a press conference todayon the UK notification.


16:16 EUR/USD drops to fresh lows near 1.0740 on ECB headlines

The EUR/USD came under renewed selling pressure amid headlines suggesting that the ECB's message at its March 9 meeting has been overinterpreted by the markets as a step to exit. The pair quickly fell to 1.0740, where it renewed the weekly low and made a weak correction afterward. As of writing, the EUR/USD is down 0.45% at 1.0765.

ECB's message

Reuters, in a recent report, said that one ECB source expressed that what they wanted to communicate in March was reduced tail risks, but now they are worried about a potential yield surge due to overinterpretation by the markets. Following the report, the probability of a December rate hike by the ECB as priced by money markets slipped to 50% from 70%.

Euro under heavy pressure on ECB headlines

Brexit

On a separate note, the Brexit process, which officially started with European Council President Donald Tusk receiving a letter from the British ambassador today, doesn't look like it's going to be smooth as a leaked copy of the European Parliament's resolution showed that there won't be any free trade arrangements in the next two years.

European parliament: No free trade agreement with Britain in next two years - The Guardian

Technical outlook

A break below 1.0710 (Fib. 38.2% - Nov/Jan fall) could aim for 1.0670 (50-DMA) and 1.0630 (100-DMA). On the upside, the first technical hurdle aligns at aligns at 1.08 (psychological level) followed by 1.0845 (200-DMA) and 1.0905 (Mar. 27 high).

 

 

 


16:16 This years European finals are in France Rabobank

According to analysts at Rabobank, the French elections are no done deal; while Macron seems destined to win, Le Pen still has a chance to win the French presidency.

Key Quotes

“All the candidates have pledged to make France great again, though their economic policy proposals vary widely.”

“Pulling France out of the Eurozone and the EU will be very difficult; even in the case of a victory for Le Pen.”

“Unlike many other European elections, the French choose their next president and their national assembly in two different elections. On April 23 this year the first round of the presidential elections will be held between several candidates in order to determine which two candidates will battle each other in the second and last round to be held on the 7th of May. The legislative election, that determines who will get a seat in the French National Assembly (French parliament), will be held on the 11th and 18th of June.”

“While we think a Macron win is currently the most likely outcome rather than a win for Le Pen, there are other, less likely scenarios too. Macron could make a mistake or be hit by scandal, evaporating his support. Then Fillon could make it to the second round and he, due to scandals around him, is less likely to beat Le Pen. Another scenario is one of the two leftist candidates, or combined ticket, reaching the second round. Results are unpredictable then as rightist voters are unlikely to support these candidates and abstain, in turn supporting Le Pen.”

“This year’s European political finals are played in France”

“Like last year’s Eurocup that was played in France, France will this year again play the leading role in the European election cycle. While the odds are still stacked against a victory by Le Pen, and especially against a subsequent parliamentary elections win, it is a non-negligible risk. If a Le Pen victory materialises, its impact will be substantial as one of the EU’s core member will likely try to tear it apart. In that sense, this year’s political finale will not be played in the Netherlands, Germany or Italy but in France.”


15:45 Lot of bad news priced into GBP - Rabobank

Jane Foley, Senior FX Strategist at Rabobank, Without doubt there is a lot of bad news priced into GBP.  This suggests a fast compromise on the Brexit bill has the capacity to trigger some short covering. 

Key Quotes

“That said, the outlook for the UK economy is heavily dependent on the trade relationship that will be in place between the UK and the EU.  May’s outlined in January that her starting point was a hard Brexit followed by a new freetrade deal with the EU.  However, insofar as May has ruled out acceptance of free movement of EU citizens, it seems unlikely that the EU would accept such an arrangement.  In January UK Chancellor Hammond threatened to change the UK’s business model if the country were denied access to the single market after Brexit.  His remarks were made in response to the suggestion that the UK could become the tax haven of Europe.  However, irrespective of the impact that this could have on UK-EU relations, this is unlikely to sit well with PM May’s attempt to attract the support of disillusioned Labour party voters in the UK.”

“It is widely recognised that the complexity of trade negotiations means that these talks are set to be lengthy.  Even PM May has recognised that only a framework is likely to be in place by the end of the two year Brexit process.  Any delay to the start of these talks is likely to lengthen the period of uncertainty regarding the outlook for the UK economy and increase downside risk for GBP.”

“It is our view that there is too much optimism regarding US reflation priced into the USD.  Consequently, we expect a broad-based weakening in the value of the greenback in the coming months.  As a result we see limited downside potential for GBP vs. the USD and expect a choppy range to emerge around the GBP/USD1.22 in the coming months.  We expect EUR/GBP to push towards the 0.89 level by the end of the year.  We see GBP as more vulnerable vs. the EUR in part because we see scope for further short-covering in EUR following the spring elections in France, assuming that Le Pen fails in her bid for the Presidency.”


15:40 Brexit Negotiations: UK PM Theresa May Speech - Article 50

“These will be very complex negotiations”

“We have been able to have a considerable amount of preparation during the previous months so we can face negotiations and get the best-possible deal for the UK”

“We don’t yet know how the EU council will frame the negotiations”

“The point about seeking a comprehensive free-trade agreement is that being a EU-member we already have a deal, we are not seeking for a new one”

“It’s in the interest of everyone around the world that we promote free-trade everywhere, not only in the UK and the EU”

 

Key Notes

First EU response to article 50

takes tough line on transitional deal “Britain will not be given a free trade deal by the EU in the next two years, and a transition arrangement to cushion the UK’s exit after 2019 can last no longer than three years, a European parliament resolution has vowed, in the first official response by the EU institutions to the triggering of article 50 by Theresa May.”


15:36 No Brexit deal is not an option for the car industry - UK s SMMT - Reuters

UK car industry body the Society of Manufacturers and Traders says the most significant threat to the competitiveness of the UK automotive sector in a generation, as reported by Reuters.

  • We need both sides in Brexit talks to reach a deal which protects “just in time” production and avoids tariffs
  • No brexitBrexitis not an option for the car industry

15:32 Money markets no longer fully price ECB rate rise next March - RTRS

Reuters reports that money markets show a chance of ECB rate rise in December below 50 pct, from 70 pct previously and they no longer fully price ECB rate rise next March, now see 80 pct chance.


15:28 European parliament: No free trade agreement with Britain in next two years - The Guardian

According to a leaked copy of the European parliament resolution, the transition period cannot take longer than three years and there won't be any free trade arrangements in the next two years, The Guardian reports.

Further key points of the document show that a withdrawal agreement, covering financial liabilities, citizens’ rights and the border in Ireland, will need to be accepted by a qualified majority of 72% of the EU’s remaining 27 member states, representing 65% of the population.


15:19 UK PM Theresa May Speech Today - GBP/USD heads towards 1.2480

GBP/USD heads towards 1.2480 as UK triggers Article 50

The Sterling is now regaining some bids as UK’s PM Theresa May is making her statement before the Parliament, sending GBP/USD to test the area of daily tops around 1.2470/80.

Theresa May Quotes:

“We all want United Kingdom, despite the dividing vote last June”

“Whether people voted for remain or leave, we now should respect the collective decision of the UK”

“If Scotland were to become independent from the UK, they would have needed to ask to be a member of the EU”

“We should look to have the maximum free trade between the two territories”

“We want a comprehensive package that allows us to control immigration but allows our business to keep free-trade access”

“What matters is the outcome of the deal, we want access to the free-trade area, and that’s what we are working for”

 

 

More on EU draft Brexit statement - Euractiv

Following are the main points from the draft EU statement, as reported by the Euractiv.com : Guidelines will set out the overall positions and principles in light of which the Union, represented by the European Commission, will negotiate with the United Kingdom

EU leaders ready for orderly Brexit, but prepared for failure

A draft European Council statement seen by EURACTIV, revealed that the EU member states regret that the UK will leave the Union, but noted that they “are ready for the process that now will have to follow”. The document states that the first step will be the adoption of guidelines for the negotiations by the European Council.

 


15:14 Euro under heavy pressure on ECB headlines

One ECB source said the bank has been overinterpreted by markets at its March 9 meeting, according to Reuters. The source also noted that they wanted to communicate reduced tail risk but the market took it as a step to the exit and added that they are worried about potential yield surge. At the moment, the Euro index is down 0.6% at 87.40.


15:05 Long-term oil price continues to decline as the reality of the new oil order sinks in Goldman Sachs

Analysts at Goldman Sachs explain that the decline in long-term prices has instead been the largest driver of the spot sell-off, $3.50/bbl out of the $6/bbl move.

Key Quotes

“This decline extends the move started in October that has taken 5-year forward Brent prices from $62/bbl to $54/bbl, a faster fall towards our 2020 $53/bbl Brent forecast than we expected. We believe this reflects (1) greater visibility on future supply sources with rising shale and OPEC production expectations, (2) the growing predictability of future sources of production given the short cycle nature of OPEC (onshore) and shale drilling, and (3) the rest of the world competing to keep up. In particular, the integrated oil majors surprised during the past earnings season with an earlier-than-expected shift in focus to more future project sanctioning while governments have started to offer better fiscal terms to stimulate investment and compete for capital.”

“These deflationary forces leave us wary expecting a sharp rebound in long-term oil prices but do not derail our view that spot prices will rise above long-term oil prices in 3Q17.”


14:53 We are leaving the European Union, but we are not leaving Europe - PM Theresa May

UK’s PM Theresa May is expected to make a statement to MPs later at 1130GMT and finally trigger Brexit Article 50. According to previous consensus, the statement should lean to the conciliatory tone, calling all Britons to unite ahead of this historical moment.

“We will negotiate as one United Kingdom”

“We will control immigration so it serves the best our interests”

“We will seek a bold and constructive free-trade agreement with the EU, a deal that gives both British and European business the best conditions to operate in both territories”

“We will make sure that we build free-trade agreements with other countries besides the EU”

“It is our right to deliver a smooth and orderly Brexit”

“We understand that there will be consequences for the UK leaving the EU” “It is in the interests of both the UK and the EU that there is as little disruption as possible”

“Leaving the EU doesn’t mean we don’t share the European values”

“We will continue to be reliable partners with the EU”

About Article 50

The UK government will begin the two-year process to exit the EU. According to the Lisbon treaty, both parts, the EU and the UK, will start now negotiating a deal on the withdrawal and establish legal grounds for a future relationship.


14:52 EU s Tusk receives Brexit notification letter from UK envoy - Reuters

European Council President Donald Tusk received a letter from the British ambassador to the EU on Wednesday, confirming Britain's intention to leave the European Union. The notification letter, handed over in Tusk's Brussels office in the presence of journalists, triggers a two-year countdown to Brexit under Article 50 of the EU treaty.

 


14:50 GBP/USD heads towards 1.2480 as UK triggers Article 50

The Sterling is now regaining some bids as UK’s PM Theresa May is making her statement before the Parliament, sending GBP/USD to test the area of daily tops around 1.2470/80.

GBP/USD bid after Article 50

The pair met some fresh buying interest after UK’s PM Theresa May has officially triggered Article 50, allowing the UK to formally initiate the negotiations to leave the European Union

Donald Tusk, President of the European Council, has confirmed he received the letter from the UK Ambassador to the EU, Sir Tim Barrow.

As PM T.May is making her statement before MPs, spot stays bid in the upper end of the range in the 1.2460/70 band for the time being despite of the underlying strength around the greenback.

GBP/USD levels to consider

As of writing the pair is up 0.18% at 1.2470 and a breakout of 1.2598 (high Mar.29) would aim for 1.2618 (high Mar.27) and finally 1.2715 (2017 high Feb.2). On the flip side, the next support aligns at 1.2378 (low Mar.29) followed by 1.2336 (20-day sma) and then 1.2239 (low Mar.16).


14:49 Theresa May House of Commons Live News

UK’s PM Theresa May is expected to make a statement to MPs later at 1130GMT and finally trigger Brexit Article 50. According to previous consensus, the statement should lean to the conciliatory tone, calling all Britons to unite ahead of this historical moment.

“Brexit a chance to step back and ask what country UK wants to be”

“We want to be a truly global Britain, the best friend to our European partners, but a country that also looks further”

“We want a partnership of values and economic affairs with EU, a partnership that works the best for both the UK and the EU”

“The world needs more than ever the liberal-democratic values of the European Union, values that UK shares”

“We are leaving the European Union, but we are not leaving Europe”

“We will work constructively to bring this partnership to be the best possible” “The government will put the Brexit deal with the EU to a vote in both Parliament houses”

 

Happy Article 50 Day to EU?

The big day is finally here, but aside from some short-term gyrations in sterling the impact of the Article 50 activation is relatively small. The day's story will focus on the actual delivery of the note, which will go down in history as one of those key moments when the diplomats take the limelight, however briefly.

ECB: Exit strategy and a modern policy rule

“According to our strategists, current market valuations are consistent with QE tapering ending in the second half of next year. Markets seem to price in a deposit rate hike in Q2 2018 and a subsequent MRO hike in Q3 2019.”

 

 


14:43 Leaving EU we will have control of our budgets - PM Theresa May

UK’s PM Theresa May is expected to make a statement to MPs later at 1130GMT and finally trigger Brexit Article 50. According to previous consensus, the statement should lean to the conciliatory tone, calling all Britons to unite ahead of this historical moment.

 

Ipsos Mori: Public concern about Europe/Brexit rises to a new high The March 2017

Ipsos MORI/Economist Issues Index published this Wednesday showed that public concern about Europe/Brexit rises to a new high and becomes the top issue facing Britain.

Brexit will give us control over migration at our own borders

UK’s Hammond: PM May’s letter to EU adds details on UK’s Brexit stance More comments flowing in from the UK Chancellor, via Reuters, this time talking to the Sky news.

About Article 50

The UK government will begin the two-year process to exit the EU. According to the Lisbon treaty, both parts, the EU and the UK, will start now negotiating a deal on the withdrawal and establish legal grounds for a future relationship.


14:40 US border tax adjustment and its implication on RMB Deutsche Bank

Research Team at Deutsche Bank explains that based on industry level information, they had estimated what a “balanced” RMB depreciation would be if the US starts to implement a border tax adjustment (BTA) along with its tax reforms.

Key Quotes

“While the discussion is largely based on the proposal outlined by the US House Speaker Paul Ryan in A Better Way, the same method can be applied to assessing other tax and trade reforms as well.”

“We find that if the US cuts its current CIT to 20% and then replaces it with a destination-based cash flow tax (DBCFT), the RMB would need to depreciate 5.8-13.7% vs. the dollar to offset the impact on China’s trade balance with the US. If currencies of other countries also move to keep their respective trade balances with the US unchanged, the implied depreciation of RMB vs. the CFETS basket (excl. USD) would be around 2.2-2.4%.”


14:39 House of Commons UK PM Theresa May Speaks - Live Video

UK’s PM Theresa May is expected to make a statement to MPs later at 1130GMT and finally trigger Brexit Article 50. According to previous consensus, the statement should lean to the conciliatory tone, calling all Britons to unite ahead of this historical moment.

 

“When we leave the European Union we will have control of our budgets and we will decide how we spend our money”

“Invoking Article 50, we are putting into practice the democratic vote of the UK people”, says May, while suggesting that the Scottish government should “do the same with the 2015 referendum on the independence of Scotland”

 

 

More on EU draft Brexit statement - Euractiv

Following are the main points from the draft EU statement, as reported by the Euractiv.com : Guidelines will set out the overall positions and principles in light of which the Union, represented by the European Commission, will negotiate with the United Kingdom

EU leaders ready for orderly Brexit, but prepared for failure

A draft European Council statement seen by EURACTIV, revealed that the EU member states regret that the UK will leave the Union, but noted that they “are ready for the process that now will have to follow”. The document states that the first step will be the adoption of guidelines for the negotiations by the European Council.


14:26 Oil: Shape of forward curve does not point to weakening fundamentals Goldman Sachs

In view of the analysts at Goldman Sachs, despite the market’s focus on US crude inventories setting new record highs, the shift in the shape of the Brent crude forward curves has been relatively modest.

Key Quotes

“The spot to 5-year price differential is back to its January level (only explaining 40% of the $6/bbl decline in oil prices) and this pullback likely reflects overly optimistic consensus expectations for the pace of inventory draws.”

“Further, the front end of the Brent forward curve, which reflects current inventory dynamics, has strengthened slightly during the sell-off. This is consistent with the oil market making progress in its rebalancing: (1) US crude inventories will lag the rebalancing as shale ramps up and US storage is the cheapest available with non-crude US inventories and non-US inventories down yoy, (2) the monthly official data now show that OECD inventories drew by a surprisingly large amount in 4Q16, and (3) the ongoing increase in EM consumer inventories will help absorb excess OECD inventories.”

“While the shale production rebound has surprised to the upside, the slightly larger compliance to the OPEC cuts than we had initially expected and the higher 2016 realized demand level lead us to continue to forecast a normalization in OECD inventories through 2017. This leads us to forecast a rotation of the forward curve with Brent spot prices trading 10% above 5-year forward prices by 4Q17. The stock draws would be accelerated if the strength in activity indicators translates into stronger oil demand growth than our above-consensus 1.6% forecast.”


14:22 European political backdrop to impact Brexit negotiations Standard Chartered

According to analysts at Standard Chartered, heightened political sensitivity is likely to toughen resistance to the UK ‘cherry picking’ EU membership benefits.

Key Quotes

“Elections in France (April-June) and Germany (September) will dominate their agendas for the first six months of Brexit negotiations, leaving the European Commission in the driving seat initially. Heightened political sensitivity is likely to toughen resistance to the UK ‘cherry picking’ EU membership benefits outside the bloc.”

“Once France’s elections are over, Italy is likely to move into focus. A general election is due by May 2018. Opposition parties oppose EU/euro (EUR) membership, either ideologically or opportunistically, and only a slim majority of Italians are in favour of the euro. Voting for the leader of the current government party, the Democratic Party (PD), takes place on 30 April; former PM Renzi may be re-elected.”


14:19 PM Theresa May: UK government taking a UK-wide approach in the negotiations with the European Union regarding Brexit

UK’s PM Theresa May is expected to make a statement to MPs later at 1130GMT and finally trigger Brexit Article 50. According to previous consensus, the statement should lean to the conciliatory tone, calling all Britons to unite ahead of this historical moment.

PM May: “UK government taking a UK-wide approach in the negotiations with the European Union regarding Brexit”

PM May: “Now it’s not the time to talk about a Scottish referendum. We need to stay as a United Kingdom to find the best Brexit deal for the whole UK”

 

 

Key Notes

Brexit: Likely to see negotiations about how to negotiate at the beginning

According to analysts at Danske Bank, while the EU wants to settle the divorce bill first before discussing the future relationship, the UK wants to discuss both simultaneously –we are likely to see negotiations about how to negotiate at the beginning and the risk of ‘no deal’ seems to be the highest here.

UK finally means Brexit

Analysts at Lloyds Bank explains that we’re set for a UK centric session, at least from a headline perspective as we’re set to see PM Theresa May trigger Article 50, following her closing remarks in PMQs at 1230, at which point Sir Tim Barrow will deliver a signed letter to EU Council President Donald Tusk.


14:19 US: Tax cut implications of pulling the AHCA - BNPP

Paul Mortimer-Lee, Chief Economist at BNP Paribas, explains that withdrawing the AHCA, the Obamacare repeal and replace bill, has damaged the President’s authority and momentum and has similarly scarred the Republican leadership.

Key Quotes

“A tax reform will create losers who will be emboldened that the President can be faced down when confronted by strong opposition.”

“The need for success on the tax reform front has risen, but there is less cash to play with now.”

“The temptation to go with simpler reforms (e.g. ditching the Border Adjustment Tax) has risen, as has the temptation to go for sunset provisions and to modify filibuster rules.” 


14:16 Oil: A new order sell-off Goldman Sachs

According to the analysts at Goldman Sachs, the oil market rebalancing appears to be unraveling, with prices back to pre-OPEC deal levels, record high US crude inventories, a sharp rebound in US drilling and a growing number of OPEC producers supporting an extension of their cuts for another six months.

Key Quotes

“Despite this lackluster start to the year, we continue to expect that OECD inventories will continue their decline, as high compliance with the cuts and strong oil demand absorb higher US production. This decline in inventories will push spot prices higher, in our view, with our 2Q17 Brent price forecast at $59/bbl.”

“Further, we reiterate our view that it is not OPEC’s goal to generate too high a recovery in prices and as a result, we believe that an extension of the cuts through 2H17 is currently not necessary. It is important to emphasize that our bullish price forecast is a view on the shape of the oil forward curve, with the faster decline in long-term oil prices than we expected this year a clear downside risk to our spot price forecast, even if our oil supply-demand projections prove correct and the rotation of the forward curve occurs.”


14:10 EUR/USD neutral, rangebound between 1.0715/1.0905 UOB

The outlook on EUR/USD remains neutral in the near term, likely to gravitate between 1.0715 and 1.0905.

Key Quotes

“While we were of the view that a short-term top was in place, the pace and depth of the pull-back was unexpected. While oversold, the current decline in EUR appears to have scope to extend lower to 1.0780 (next support is at 1.0760). Resistance is at 1.0840 and yesterday’s high near 1.0870/75 is likely strong enough to cap any intraday rebound”.

“The call to wait for a daily closing above 1.0870/75 before turning bullish was right as EUR unexpectedly dropped sharply to hit an overnight low 1.0796. The 1.0904 high registered on Monday is viewed as a short-term top and EUR has likely moved into a consolidation phase even though the immediate bias is for probe lower towards the bottom of the expected 1.0715/1.0905 range”.

 

 


14:06 UK negotiators will likely face pressure on the home front Standard Chartered

Research Team at Standard Chartered expects that in addition to dealing with EU-27 priorities, UK negotiators will likely face pressure on the home front.

Key Quotes

“Several domestic factors could influence both the UK government’s negotiating authority and the post-Brexit impact of the divorce:

1. The Great Repeal Bill. This bill aims to place EU law onto the UK statute book in its entirety, in order to avoid a legal vacuum after Brexit. But a large number of laws would need to be amended within a short, two-year timeframe. The bill would, via delegated powers, allow ministers to amend or repeal large amounts of legislation without much scrutiny by parliament. Handing over power in this way could be controversial, especially if parliament believes that ministers are going beyond their remit and making deep changes to policy.

2. Scotland and Northern Ireland (NI). Support for Scottish independence may gain traction if Brexit talks are painful. PM May has rejected a request for a Scottish independence referendum before Brexit, but Westminster’s authority will be challenged if Brexit is perceived as damaging Scotland’s interests. 

NI represents an enormous challenge to the Brexit process, as the Good Friday Agreement ensured porous borders between NI and the Irish Republic, and the right of NI citizens to hold British and Irish citizenship is enshrined in the agreement. The main unionist and republican parties are struggling to find common ground following elections that saw the nationalist Sinn Fein nearly overtake unionists as the largest party; a new election may have to be called. Sinn Fein’s success will encourage the party to demand “special status” for NI in the EU, re-igniting discussion of a ‘border poll’ on reuniting Ireland, though for now, support in NI for reunification is low.

3. The economy. The economy has fared better than expected since the Brexit referendum, but inflation is spiking and there are signs that growth momentum is fading – quarterly GDP growth releases will likely punctuate the Brexit negotiations. Balance-of-payment releases will also be of interest, indicating how far the weaker British pound (GBP) is helping exports and investment income, and whether inward foreign direct investment is being discouraged by Brexit.”

Bank of England (BoE) quarterly Inflation Report forecasts will outline whether the BoE is ready to withdraw policy accommodation; a chaotic Brexit raises the likelihood of policy staying on prolonged hold, in our view. If the recent slowdown in EU immigration persists, challenges for businesses and policy makers could grow, undermining the narrative behind the government’s ‘hard Brexit’ stance.”


14:04 USD/CHF stays upside corrective Commerzbank

In opinion of Karen Jones, Head of FICC Technical Analysis at Commerzbank, rallies in USD/CHF should faced strong resistance in the 0.9960/1.000 band.

Key Quotes

“The cross has recently fallen into new lows for the year, but has failed to close below the 55 week ma at .9875 and are upside corrective. Bounces are indicated to remain capped by .9960/1.000. The .9880/50 region has been eroded (this is this years’ low, the 55 week ma and the 61.8% retracement) and we would like to see a close below here to confirm the break. Downside risks are growing and we look for losses to .9720, the 78.6% retracement”.

“The market stays offered below the 20 day ma at 1.0020. Only above here would alleviate downside pressure and retarget 1.0248 11th January high and the 1.0328 2015 and 1.0344 December 2016 highs”.

 

 


14:02 United States MBA Mortgage Applications: -0.8% (March 24) vs -2.7%


14:01 Euro area reflation story ending Danske Bank

Senior Analyst, Pernille Bomholdt Henneberg at Danske Bank, explains that the rise in inflation to the ECB’s 2.0% target for the first time since 2013 implies that market expectations have turned in favour of expecting a more hawkish stance from the ECB (a 50% probability of a 10bp deposit rate hike from the ECB is priced in for the end of this year).

Key Quotes

“However, the rise in inflation has so far been driven by volatile energy and unprocessed food price inflation, while the underlying price pressure reflected in core inflation remains subdued. Consistent with weak underlying price pressure, the market is pricing in lower inflation in coming months (down at 0.8% in January 2018), which in our view is in sharp contrast with the expectations of a policy rate hike this year.” 

“We expect the ECB to decide on whether to start tapering its QE purchases at the meeting on 7 September. Hence, we consider the inflation figures released ahead of this meeting.”

Our conclusion is that the rise in inflation is not a sustained adjustment towards the 2% target, as core inflation is set to print below 1.0% for the next six months, except for one month where it will be lifted by the timing of Easter. The most important reason why core inflation should stay modest is our expectation of subdued wage pressure due to slack in the labour market particularly in the periphery countries but also continued modest wage growth in Germany.” 

Based on this, we still expect the ECB to announce a third QE extension in September and most likely continue buying assets of EUR60bn per month, as its focus will remain on the underlying price pressure. However, the ECB might continue to remove some of its dovish communications from the introductory statement prior to this but, in our view, this does not mean it will start hiking policy rates or tapering QE towards zero.”


14:00 EUR/JPY bounces off lows, hovering over 119.80

After dropping to fresh lows near 119.60 in early trade, EUR/JPY is now attempting to clinch the 119.80 level although it remains well entrenched into the red territory.

EUR/JPY weaker on EUR-selling

The cross is retreating for the second session in a row so far today, trading in the lower bound of the weekly range following a persistent selling bias around the European currency while a decent bid tone stays around the safe haven Yen.

EUR remains under pressure amidst a pick up in the demand for the greenback, while the poor performance from US yields and some risk aversion following the ‘Trumpcare’ fiasco and developments around Brexit have lent extra support to JPY.

Nothing noteworthy data wise today, although the speech by UK’s PM Theresa May should keep markets entertained, as she will finally trigger Article 50.

EUR/JPY relevant levels

At the moment the cross is losing 0.32% at 119.78 facing the immediate support at 119.67 (low Mar.29) followed by 119.27 (low Mar.23) and then 118.18 (2017 low Feb.24). On the other hand, a surpass of 120.44 (high Mar.29) would expose 120.87 (20-day sma) and finally 121.88 (high Mar.21).


13:54 EURGBP: Move back through 0.8605-0.8585 needed to change the dynamic Lloyds Bank

In view of the analysts at Lloyds Bank, resistance above for EURGBP cross is in the 0.8860-0.9000 region while the pivot support remains at 0.8605-0.8585 and a move back through there is needed to really change the dynamic for the pair.

Key Quotes

“Longer term, it is unclear if the declines from last October’s highs are corrective, or part of a more complex topping process. A break of 0.8300-0.8250 key support would suggest a meaningful top developed, with 0.80-0.78 next support. But, while over, we cannot rule out an eventual re-test of the ‘flash crash’ highs and potentially the 2009 highs at 0.9802.”  


13:49 UK: CPI inflation to rise further this year, reaching levels around 3% - Deutsche Bank

According to Markus Heider, Economist at Deutsche Bank, UK inflation surprised to the upside in February, with details showing a broad-based increase and clear evidence of upward pressure from the weaker currency and higher energy costs and they see both CPI and RPI inflation rising further this year, reaching levels around 3% and 4% respectively in Q4.

Key Quotes

“UK inflation surprised to the upside last month, and for both, RPI and core CPI, three out of the last four prints have been above consensus forecasts, suggesting inflation may be on an above-expectations trajectory. The increase in inflation in February was broad-based, with clear evidence of upward pressure from the weaker currency and higher energy costs. Looking at the main components separately, energy contributed about 0.1pp to the 0.5pp acceleration in headline y/y CPI inflation, and while lower oil prices will put downward pressure on petrol prices, rising utility bills will likely mean that overall energy inflation stays high in the coming two months.”

“Food inflation rose strongly as suggested by leading indicators such as PPI, as well as business surveys. Upward pressure from a stabilisation in global agricultural prices and a weaker exchange rate may have been amplified by a weather related decline in seasonal food supply, as had been signalled by similar trends in the euro area and the food (including alcohol and tobacco) aggregate contributed about 0.1pp to the rise in overall y/y CPI inflation last month. Further increases in food inflation can be expected in the coming months, although in February food producers reported slowing input cost inflation for the first time in almost one year.”


13:42 EURUSD: Not expecting a decline through the key 1.01-0.99 support Lloyds Bank

Analysts at Lloyds Bank point out that EURUSD bulls will be disappointed by the yesterday’s price action following the break of 1.0875 technical resistance while supports are standing at 1.0740/10 and 1.0675. 

Key Quotes

“Long term, the break of last year’s 1.0450 lows is arguably the last in the cycle from the 1.6020 highs set in 2008. We are not expecting a decline through the key 1.01-0.99 support (outside of a major election upset), with the next major move expected to be back to 1.15 and eventually 1.2000-1.2350.”


13:37 EUs negotiation stance on Brexit Danske Bank

Analysts at Danske Bank note that according to the EU’s Chief Brexit negotiator Michel Barnier, the UK and EU need to find a solution to the 1. ‘Divorce bill’ (which EU estimates to be around EUR60bn), 2. Citizens’ rights (both UK citizens living in EU and EU citizens living in the UK) and 3. External borders (Ireland vs Northern Ireland) before moving on to discuss the future relationship.

Key Quotes

“Barnier writes ‘If we cannot resolve these three significant uncertainties at an early stage, we run the risk of failure’.”

“The EU and UK need to agree on an ‘orderly withdrawal of the UK before negotiating any future trade deal’.”

“Previously he said that (1) EU27 will be united, (2) the UK cannot get a deal which is better than full membership, (3) the UK cannot get full access to the single market if it does not accept the four freedoms (free movement of goods, services, capital and people). Cherry picking is not an option.”

“Donald Tusk is set to publish draft Brexit guidelines ‘within 48 hours of the UK triggering Article 50’. Guidelines expected to reflect Barnier’s three points.”


13:32 GBPUSD: Reversal in the medium term range Lloyds Bank

Research Team at Lloyds Bank explains that after having failed to hold gains above 1.26, yesterday’s weakness – possibly related to the progression of Scotland’s request for another independent referendum – extended overnight for GBPUSD.

Key Quotes

“We have dipped below pivot support at 1.2450-1.2400 adding to the bearish sentiment. Daily momentum studies had warned of reversal in the medium term range, and a decline through 1.2360/50 support would add conviction for a re-test of the range lows. Below there, supports now lie at 1.2305/00 and 1.2250/20. Resistance is at 1.2480, 1.2560/70 then 1.2645.” 

“Long term, we believe the decline that started back in 2007 at 2.1160 is close to completing with the move under 1.30. While it is unclear that 1.1491 was the major base, 1.15-1.08 is our ideal ultra-long term basing region.”


13:31 GBP/USD could slip back to 1.2300 UOB

FX Strategists at UOB Group believe Cable could attempt a test of the 1.2300 handle in the next 1-3 weeks.

Key Quotes

“While we expected GBP to edge lower to test the 1.2525 support, the sharp plunge that hit an overnight low of 1.2442 was clearly unexpected. The sharp drop appears to be running ahead of itself but with no signs of stabilization, further weakness towards 1.2370 seems likely (next support is at 1.2335)”.

“The sudden plunge in GBP yesterday was clearly unexpected. The break of 1.2465 indicates that the bullish phase that started last Monday has ended. The pullback from the 1.2615 high seen earlier this week appears to have scope to extend lower to 1.2300. At this stage, a sustained move below this level is not expected. All in, GBP is expected to stay under pressure from here unless it can move and stay above 1.2505 within these few days”.

 

 


13:28 France: Further acceleration Deutsche Bank

Analysts at Deutsche Bank note that in France, the latest composite PMI increased strongly to a new cyclical high of 57.6 in the flash March reading (exp 55.6; Feb 55.9) suggesting strong economic momentum.

Key Quotes

“The composite index is up over 6 points since November – equivalent to a fourfold acceleration in growth from 0.6% annualized to close to 2.5% annualised. This acceleration has been down to the services index (up by 7 points since October), while the manufacturing PMIs have stabilised in the past 3 months after increasing the latter part of 2016.”

“Looking at the less volatile quarterly figures, for Q1 2017 the French composite PMI points to growth of around 0.5% qoq (2% annualised). This is a similar level to that signaled by the INSEE survey, although the latter retreated this month – with the overall business confidence index down from 104.1 to 103.7 as the industry and construction confidence indicators retreated from their February peaks.”


13:27 EUR/USD near term outlook neutralizing Commerzbank

In view of Karen Jones, Head of FICC Technical Analysis at Commerzbank, EUR/USD stays bid while above 1.0798 for the time being.

Key Quotes

“The cross has eased lower having failed to close above the 1.0877 200 day moving average. The market stays immediately bid above 1.0798 – and we remain unable to rule out a challenge of the 1.0978/1.1000 region. This area is where the 100% Fibonacci extension of the January-to-February advance, projected from the February low, coincides with the 50% retracement of the move down from the May peak. Please note that the intraday Elliott wave counts have become more negative and suggesting that rallies will struggle circa 1.0835 and we suspect the chart is neutralising”.

“Below 1.0760. Will alleviate immediate upside pressure and trigger a slide back to the 55 day ma at 1.0674”.

 

 


13:18 Opinionway Poll: Macron/ Le Pen now 64/36 in 2nd round

The latest Opinionway daily poll on French elections showed a pick-up in ticks by the French presidential candidate Macron against his closest rival Le Pen.

Key Details:

Macron/ Le Pen now 64/36 in 2nd round versus 62/38 previous

Fillon/Le Pen 60/40 vs 58/42 prior

1st round Le Pen/Macron/Fillon 25/25/20 vs 26/24/20


13:11 UK PM Theresa May triggers Brexit Article 50 Live Coverage

UK’s PM Theresa May is expected to make a statement to MPs later at 1130GMT and finally trigger Article 50. According to previous consensus, the statement should lean to the conciliatory tone, calling all Britons to unite ahead of this historical moment.

At about the same time, her letter should be hand-delivered by Sir Tim Barrow, UK Ambassador to the EU, to Donald Tusk, President of the European Council. From that moment, the clock will begin to tick signaling the start of (at least) 2-year negotiations that should end with more than 40-years of association between the UK and the EU.

Key Notes

Brexit: Likely to see negotiations about how to negotiate at the beginning

According to analysts at Danske Bank, while the EU wants to settle the divorce bill first before discussing the future relationship, the UK wants to discuss both simultaneously –we are likely to see negotiations about how to negotiate at the beginning and the risk of ‘no deal’ seems to be the highest here.

UK finally means Brexit 

Analysts at Lloyds Bank explains that we’re set for a UK centric session, at least from a headline perspective as we’re set to see PM Theresa May trigger Article 50, following her closing remarks in PMQs at 1230, at which point Sir Tim Barrow will deliver a signed letter to EU  Council President Donald Tusk.

About Article 50

The UK government will begin the two-year process to exit the EU. According to the Lisbon treaty, both parts, the EU and the UK, will start now negotiating a deal on the withdrawal and establish legal grounds for a future relationship.

13:10 USD/JPY pierces 111.00, daily lows

The greenback has retreated from daily highs vs. its Japanese counterpart, prompting USD/JPY to drop to session lows in sub-111.00 levels.

USD/JPY lower on weaker US yields

Spot is deriving downside pressure from the poor performance of yields in the US money markets, where the 10-year reference has managed to bounce off daily lows and has now regained the 2.41% level.

The pair is retreating for the third consecutive week so far, finding strong support in the 110.00 neighbourhood – where sits the key 200-day sma - although still struggling to gather some sustainable upside traction.

Recent comments by Dallas Fed R.Kaplan (voter, hawkish) pointed to the possibility of further tightening as long as the US data stays on the current track. However, Governor J.Powell noted later that uncertainty still lingers on the potential fiscal measures to be implemented by the Trump’s administration.

In the US data space, Pending Home Sales are due along with speeches by Chicago Fed C.Evans (voter, centrist), Boston Fed E.Rosengren (2019 voter, dovish) and San Francisco Fed J.Williams (2018 voter, centrist).

USD/JPY levels to consider

As of writing the pair is losing 0.13% at 111.01 and a drop below 110.93 (low Mar.29) would aim for 110.12 (low Mar.27) and finally 109.91 (50% Fibo of the November-December rally). On the other hand, the immediate hurdle lines up at 111.81 (high Mar.22) ahead of 112.89 (high Mar.20) and then 113.00 (20-day sma).


12:59 First EU response to article 50 takes tough line on transitional deal The Guardian

The Guardian carries details of the leaked draft docs of an EU parliament resolution, as reported by Livesquawk.

Key Quotes:

"Leaked European parliament resolution puts three-year limit on transition arrangement and says no to free trade agreement in next two years”

“Britain will not be given a free trade deal by the EU in the next two years, and a transition arrangement to cushion the UK’s exit after 2019 can last no longer than three years, a European parliament resolution has vowed, in the first official response by the EU institutions to the triggering of article 50 by Theresa May.”

“A leaked copy of the resolution, on which the EU’s chief Brexit negotiator, Michel Barnier, has been a close conspirator, lays bare the tough path ahead for Britain as the historic process of withdrawing from the trade bloc begins.”

Full read here


12:52 EUR/USD off-lows, but remains below 1.0800

The EUR/USD pair is seen making minor-recovery attempts from three-day troughs reached at 1.0777 last hours, although sellers continue to lurk at 1.0800 levels, keeping the recovery in check.

The spot remains under pressure on the back of broad based US dollar strength, while positive European indices and higher oil prices keep the market sentiment buoyed and hence, weigh somewhat on the funding currency euro.

However, the losses remain restricted, as the shorter-duration treasury yields turn negative, which could eventually drag the buck lower. Looking ahead, focus remains on the Article 50 trigger, which is expected to have a significant impact on the pound and a ‘rub-off’ effect on the EUR.

Meanwhile, the major will also take cues from the US pending home sales and FOMC member Evans speech due on the cards later today.

EUR/USD Technical Levels   

Karen Jones, Analyst at Commerzbank explains, “EUR/USD’s near term outlook is neutralising: The cross has eased lower having failed to close above the 1.0877 200 day moving average. The market stays immediately bid above 1.0798 – and we remain unable to rule out a challenge of the 1.0978/1.1000 region. This area is where the 100% Fibonacci extension of the January-to-February advance, projected from the February low, coincides with the 50% retracement of the move down from the May peak. Please note that the intraday Elliott wave counts have become more negative and suggesting that rallies will struggle circa 1.0835 and we suspect the chart is neutralising.”

 


12:31 More on EU draft Brexit statement - Euractiv

Following are the main points from the draft EU statement, as reported by the Euractiv.com :

Guidelines will set out the overall positions and principles in light of which the Union, represented by the European Commission, will negotiate with the United Kingdom

Bloc will act as one to minimise the uncertainty caused by the decision of the United Kingdom for our citizens, businesses and member states

Will approach these talks constructively and strive to find an agreement. In the future, we hope to have the United Kingdom as a close partner

 


12:06 EU leaders ready for orderly Brexit, but prepared for failure Euractiv

A draft European Council statement seen by EURACTIV, revealed that the EU member states regret that the UK will leave the Union, but noted that they “are ready for the process that now will have to follow”.

The document states that the first step will be the adoption of guidelines for the negotiations by the European Council.


12:01 Ipsos Mori: Public concern about Europe/Brexit rises to a new high

The March 2017 Ipsos MORI/Economist Issues Index published this Wednesday showed that public concern about Europe/Brexit rises to a new high and becomes the top issue facing Britain.

Key Points:

Level of concern with Europe/Brexit rises again to a new record high since the Index started in September 1974

Worry about the NHS falls seven percentage points but remains elevated

Half (51%) now cite it as an issue, six percentage points higher than February and the highest score since records began in September 1974.

Fieldwork was conducted 10-19 March, prior to the attack outside Parliament on the 22nd of this month.


11:50 GBP/USD recovers further to 1.2450 ahead of Article 50

The GBP/USD pair refreshed daily tops near 1.2450 region, having found solid support once again near 1.2380 levels, in the wake of a better risk environment amid higher European equities and rising oil prices.

Moreover, the ongoing recovery in cable derived support from optimistic remarks from the UK Chancellor Hammond, after he said in an interview with BBC Radio 4 that he is confident UK will not get a ‘worst case’ outcome in Brexit negotiations, which eases ‘Hard Brexit‘ concerns.

However, the recovery may remain fragile, as investors brace for the UK PM May’s speech and EU President Tusk’s press conference, following which a two-year process of the UK leaving the EU will commence and could trigger political upheaval in the coming months.

GBP/USD Levels to consider            

Richard Perry at Hantec Markets explains, “The hourly chart shows a sharp change in outlook since yesterday afternoon with the hourly indicators negatively configured. The failure of the support band $1.2430/$1.2460 now means that the support between $1.2320/$1.2340 is now key within the range. Another strong bear candle today below the support would open $1.2250. The initial resistance is the $1.2430/$1.2460 old support. There is likely to be increased volatility today, but considering traders have had a while to prepare for this day, much should be contained.”

 


11:49 Brexit: Likely to see negotiations about how to negotiate at the beginning Danske Bank

According to analysts at Danske Bank, while the EU wants to settle the divorce bill first before discussing the future relationship, the UK wants to discuss both simultaneously –we are likely to see negotiations about how to negotiate at the beginning and the risk of ‘no deal’ seems to be the highest here.

Key Quotes

“The UK and EU will probably have to negotiate about how to negotiate after the triggering of Article 50. Due to the ratification process, a deal (or at least a transitional deal) has to be reached by October 2018 the latest.”

“The UK is set to leave the single market and the custom union, as staying within means it cannot make free trade deals with other countries.”

“It is unlikely that a full deal can be reached within the two years of negotiations so the UK and EU are likely to agree on a transitional phase, especially for exposed industries such as autos, agriculture and financial services.”

“The UK has ruled out contributing significantly to the EU budget, which may create tensions among EU27, as the UK is one of the biggest net contributors to the EU budget. This is one of the UK’s best negotiation weapons.”

“In our base case, the final deal will be something similar to the EU-Canada CETA deal, which reduces/removes trade barriers for goods but remains weak on service. The UK is set to lose passport rights for banks.”

“Risk of a so-called ‘cliff edge’ Brexit with no agreement has increased, as May has said that ‘no deal is better than a bad deal’. We think that the risk is highest at the beginning of the negotiations due to disagreement on the ‘divorce’ bill.”


11:43 UK finally means Brexit Lloyds Bank

Analysts at Lloyds Bank explains that we’re set for a UK centric session, at least from a headline perspective as we’re set to see PM Theresa May trigger Article 50, following her closing remarks in PMQs at 1230, at which point Sir Tim Barrow will deliver a signed letter to EU  Council President Donald Tusk.

Key Quotes

“The activation of this will initiate the two-year process of the UK leaving the EU, paving the way for negotiations of exit terms, development of the new relationship and discussions over any prospective transitional arrangements. Given that the event has been well flagged, UK rates and GBP are at mid-range levels and there is unlikely to be any new information of significance, we see relatively little market impact.”

“Elsewhere, US Fed speakers scheduled to appear today include Rosengren, Williams and Evans, although only the latter is a voter this year. Evans – a moderate dove – recently suggested that persistent uncertainty around inflation and government spending could see two hikes as more appropriate for this year. The ECB’s Praet, who recently quelled some of the excitement building over the prospect of ECB deposit rate hikes, is also due to deliver a keynote speech.”


11:37 United Kingdom M4 Money Supply (YoY) fell from previous 7% to 5.7% in February


11:37 United Kingdom Mortgage Approvals registered at 68.315K, below expectations (69.9K) in February


11:37 United Kingdom Net Lending to Individuals (MoM) meets forecasts (4.9B) in February


11:31 United Kingdom Consumer Credit above expectations (1.3B) in February: Actual (1.441B)


11:30 EUR/GBP back below 0.8700, Article 50 eyed

The now softer tone around the common currency is pushing EUR/GBP to return to the area below the key 0.8700 handle.

EUR/GBP focus on Article 50

The European cross came under further pressure today following a pick up in the demand for the Sterling and a renewed offered bias surrounding the euro.

The cross is poised to stay in the centre of the debate later in the session, as UK’s PM Theresa May is expected to trigger Article 50 passed the midday in the Old Continent, followed by a speech to MPs.

Triggering Article 50 will start negotiations expected to last at least two years (by end March 2019), and will see the UK leaving the euro bloc after more than 40 years of association.

Adding some concerns to the situation, the Scottish Parliament voted on Tuesday in favour of a second independence referendum, although timing and further details are still unclear.

EUR/GBP key levels

The cross is now advancing 0.07% at 0.8689 and a surpass of 0.8735 (high Mar.29) would expose 0.8788 (high Mar.14) and then 0.8860 (2017 high Jan.16). On the other hand, the next support is located at 0.8674 (20-day sma) ahead of 0.8614 (low Mar.28) and finally 0.8603 (55-day sma).


11:30 UKs Hammond: PM Mays letter to EU adds details on UKs Brexit stance

More comments flowing in from the UK Chancellor, via Reuters, this time talking to the Sky news.

Headlines:

Brexit will give us control over migration at our own borders

we understand we will have to do some give and take" to get the best deal for UK

PM May’s letter to EU adds details on UK’s Brexit stance

UK will secure a deal where British courts and parliament have control


11:30 United Kingdom M4 Money Supply (MoM) registered at -0.3%, below expectations (0.5%) in February


11:01 Sweden Consumer Confidence (MoM) dipped from previous 104.5to 102.6 in March


11:01 Italy Consumer Confidence rose from previous 106.6to 107.6 in March


11:01 Switzerland ZEW Survey - Expectations climbed from previous 19.4 to 29.6 in March


11:01 Italy Business Confidence above expectations (106) in March: Actual (107.1)


10:59 US: Trump effect continues to reverberate - Rabobank

According to Bas van Geffen, Quantitative Analyst at Rabobank, the Trump effect continues to reverberate through the United States as consumer confidence, as measured by the Conference Board, was off the charts.

Key Quotes

“March confidence came in at 125.5, much stronger than the expected 114, and well above the February estimate of 114.8 – which was revised up as well! Households surveyed expressed broad optimism. Especially their outlook for the labour market and business conditions was positive.”

“However, the fact that Trump’s administration had to pull the health bill for lack of support from Congress could also spell trouble for the implementation of Trump’s other proposals. Signals that Trump will be unable to win over Congress for his other plans, such as tax proposals and initiatives intended to further boost the job market, could hit this post-Trump optimism in the US economy.”

“For now, bets are still on Trump succeeding. The Fed’s Fischer stated yesterday that two more rate hikes this year seem “about right”. Though Mr. Fischer added that they are watching the developments on Capitol Hill closely, he currently sees no big changes in the FOMC’s outlook. US rates rose, with 10y Treasury yields touching 2.42%. Fisher’s remarks also lent support to the US dollar, which appreciated sharply in US trading. EUR/USD declined from the 1.086-level around which it traded for most of yesterday to just under 1.08 at the time of writing.”


10:57 EUR/USD deflates to lows around 1.0780

The selling pressure around the single currency is now picking up pace, dragging EUR/USD to test fresh 3-day lows in the 1.0785/80 band.

EUR/USD weaker on USD-bids

The continuation of the rebound in the US Dollar is putting the pair under renewed downside pressure on Wednesday, shedding over a cent already since Monday’s fresh YTD tops just beyond 1.0900 the figure.

When tracked by the US Dollar Index, the buck stays on track to recover the psychological 100.00 handle so far today, advancing to daily highs near 99.80 after dropping to as low as the mid-98.00s in the wake of the ‘Trumpcare’ fiasco.

Solid results from the US docket yesterday saw US CB’s Consumer Confidence reaching highs last seen in December 2000, while Dallas Fed R.Kaplan (voter, hawkish) kept more rates ‘on the table’ as long as the economy accompanies.

Later in the NA session, UK’s PM Theresa May is expected to finally trigger Article 50, whereas Pending Home Sales will along with speeches by Chicago Fed C.Evans (voter, dovish), Boston Fed E.Rosengren (2019 voter, dovish) and San Francisco Fed J.Williams (2018 voter, centrist) are all due across the Atlantic.

EUR/USD levels to watch

At the moment the pair is losing 0.25% at 1.0787 facing the immediate support at 1.0759 (low Mar.24) ahead of 1.0704 (low Mar.16) and finally 1.0694 (20-day sma). On the flip side, a break above 1.0873 (high Mar.28) would target 1.0877 (200-day sma) en route to 1.0905 (high Mar.27).


10:56 Germany: Sentiment trends even higher raising upside risks to Q2 GDP Deutsche Bank

Analysts at Deutsche Bank explain that sentiment in Germany ended Q1 on a very strong note with PMI data generally surprising to the upside.

Key Quotes

“The composite PMI (57.0 vs. 56.1 prev.) continued its upward trend especially as manufacturing companies further raised their assessment to a 71-month high (58.3 vs. 56.8) thanks to accelerating output, domestic and foreign orders. Services sentiment improved further (55.6 vs. 54.4) too, with broad based strength in the details but is overall somewhat less buoyant. This suggests that German growth drivers could swing from domestic demand more towards external factors that could potentially overpower the negative impact of political uncertainty on domestic investment.” 

“At these levels PMIs are consistent with 0.7% qoq GDP growth in Q1 with the January/February ifo not far behind (0.6%) and well above our own forecast (0.4%). The limited available hard data for Q1 as well as some temporary effects support our more cautious assessment. However, despite our skepticism with regards to the quantitative implications of the current sentiment levels on realized GDP growth, the further uptrend poses upside risk especially to our Q2 GDP forecast (DBe: +0.3%).”


10:53 UK: All eyes are on 10 Downing Street - Rabobank

Bas van Geffen, Quantitative Analyst at Rabobank, explains that in Europe, all eyes are on 10 Downing Street after last night, UK Prime Minister May signed the notice to the European Commission that it intends to withdraw from the EU.

Key Quotes

“This marks the start of a 2-year race against the clock to complete negotiations and to draw up a framework for UKEU relations from 2019 onwards. EC President Donald Tusk has earlier promised that Europe will respond to the UK’s letter within 48 hours – setting out the guidelines for the negotiations.”

“While May’s administration is looking to get the most out of a break-up with mainland Europe, May is also facing another struggle to keep the Kingdom united in the wake of these talks. Scottish parliament backed Ms. Sturgeon’s call for a new independence referendum yesterday. If approved by Westminster, a second referendum would give Scotland some bargaining power in the Brexit talks, and –more importantly– could therefore limit PM May’s.”

“Though this could lower the chances of a hard Brexit –if May wants to keep the UK from breaking up– the currency was mainly driven by the renewed bout of uncertainty that a second Scottish referendum may bring. Cable fell below 1.24.”


10:49 GBP: Further downside risks - HSBC

Away from the economic arguments as to whether GBP should be a cyclically or structurally driven currency, analysts at HSBC also see further downside risks to the currency from a political angle.

Key Quotes

“Article 50 notification means there will be a much closer focus on the negotiation process, even if this does not begin immediately. In this negotiation process, we still have everything before us. Given the various “red lines” set up by both sides of the discussion, and the seemingly wide gap between the two on a number of key issues, we struggle to see this being a smooth process.”

“There have been a number of recent reminders from both the UK and the EU authorities that a “no deal” scenario is possible. With the two-year negotiation clock set to start ticking, the market may have to assign a greater probability to such a scenario, especially if the early stages of negotiations highlight the stark differences on these key areas, rather than the potential for a collaborative outcome.”

“The market may still want to remain in the epoch of belief, but as the negotiations begin, we may shift further into the epoch of incredulity. As such we still see further downside risks for GBP. GBP should be seen in a structural, rather than a cyclical, light. Inflation is not positive for the currency as it has been in the past. Higher prices are not being driven by higher growth, and inflation is therefore less likely to be accompanied by tighter monetary policy. The UK’s external imbalances have not yet shown significant signs of improving. We see GBP-USD falling to 1.10 by the end of 2017 and EUR-GBP moving to parity. For the currency, we still believe this is the worst of times.”


10:46 Eurozone: PMIs point to an acceleration of the Franco-German growth engine Deutsche Bank

Peter Sidorov, Economist at Deutsche Bank, explains that Euro composite PMI reaches new cyclical highs for the second month in a row as the composite PMI again surprised to the upside in the March flash reading, rising by 0.7 points to 56.7 (exp 55.8), a second consecutive cyclical high.

Key Quotes

“As in February, the rise was driven by the services index (up 1.0pts to 56.5). The manufacturing PMI also improved in the headline (up 0.8pts to 56.2) but it was flat in output subindex.”

France and Germany accelerate; ‘non-core’ marginally down

Both France (+1.7pts to 57.6) and Germany (+0.9pts to 57.0) led the way for the acceleration of the euro area composite PMI. With France and Germany printing stronger rises than the EMU aggregate, the data suggest a marginal decline (-0.2pts) on average in the composite PMI in Italy, Spain and Ireland. The PMIs in the ‘core’ and ‘noncore’ countries had moved largely in line since the middle of last year but today’s flash figures appear to suggest that the improvement in the latter may have now reached its peak while the Franco-German engine continues to gather steam. Of course, the usual caution against reading too much into one month’s data applies.”

New cyclical highs across the board for the euro composite PMI subindices

The positive message of the euro area PMI headline was shared in the details. The euro area composite PMI subindices – new orders, employment, input and output prices and backlogs of work – all reached new cyclical highs in today’s reading. Of these we would in particular highlight the 1 point rises in employment (54.9) and output prices (53.2). The latter is among the signals of increasing pipeline inflation pressures, while the former stands at odds against expectations for euro area employment growth to slow down slightly in 2017 from the impressive 1.3% yoy seen in 2016.”

Surveys signal upside risk to our Q1 growth view but hard data are more mixed

At the average Q1 level of 55.7, the euro area composite PMI is consistent with GDP growth of between 0.6% and 0.7% qoq, well to the upside of our projection of between 0.3% and 0.4%. This upside is most visible in Germany. We have highlighted the upside from surveys to our growth view since the start of the year, but the hard data flow has been more mixed suggesting a more limited upside than the surveys. This may in part reflect seasonal volatility, although in Germany the survey versus hard data dichotomy has been present since Q3 2016. We remain watchful of the hard data flow. The February data start with retail sales figures at the end of next week.” 

We see a clearer upside risk to our view for Q2 than for Q1

We see a more significant risk form the positive PMIs relative to our view as being for Q2. At its latest level, the euro area composite PMI is in line with the economy growing at between 0.7% and 0.8% qoq. Our moderate Q2 growth view (0.3%) is predicated on some slowdown in activity due to the political calendar. However, surveys have shown no sign of this having an effect thus far. With less reason to expect temporary effects to weigh on activity as in Q1 (e.g. the very cold January), we see latest PMIs as presenting a clearer upside risk to our Q2 view than for Q1.”


10:37 UK: Governments decision to trigger Article 50 is making all the headlines - SocGen

Kit Juckes, Research Analyst at Societe Generale, points out that the British Government’s decision to trigger Article 50 and start the process of leaving the EU is making all the headlines today.

Key Quotes

“So, the Article 50-triggering letter is signed and will be handed over at 12:20 BST. The pound’s down about half a percent though there’s no logic in that. Today’s ceremony changes nothing. A divided Great Britain decided to leap lemming-like into the sea months ago, led by a Prime Minister who promises a bright future but has no clear road-map showing us ho to get there. Sterling, in trade-weighted terms, is very cheap. But then real bond yields, in absolute and relative terms, are very low (even if they’re now just above -2%). And until we get Q4’s data, the current account deficit is huge at 5.1% GDP (it will get smaller in Q4 but it will still be huge).”

“Where the pound goes now depends to a very large degree on economic data. The political shock is surely mostly priced in. But the danger is that the economy slows even as the UK has a sticky inflation rate. That would leave the MPC navigating sot growth and a bit of inflation, and leave UK real rates and yields anchored while elsewhere -notably in a resurgent Eurozone – they rise. That is why we remain bullish of EUR/GBP over the medium term. The dangers to that trade, French politics and UK economic resilience, both seem smaller than the likelihood we have a serious look at parity between the pound and the euro in the years ahead.”


10:27 US: Sharp rise in long interest rates to impact emerging market currencies - Natixis

Nordine NAAM, Research Analyst at Natixis, explains that how a sharp rise in US long interest rates to 5% might impact the different asset classes.

Key Quotes

“A rise in US long-term interest rates towards 5% (at end-2018) would clearly have an impact on the forex market and on interest rates in emerging countries. That said, the effects of the rise in US long rates will differ according to two scenarios: under scenario 1, the Fed normalises its monetary policy gradually; scenario 2, meanwhile, is characterised by rising inflation and protectionism. The trajectory of the dollar differs under our two scenarios. In the first scenario, we expect a stronger dollar underpinned by the gradual normalisation of the Fed’s monetary policy. In the second, the dollar is weaker under the effect of rising inflation, US protectionism and weaker global trade, which negatively affects emerging countries.”

“The impact of the rise in US long rates towards 5% will be especially visible in emerging assets, and exchange rates and sovereign bonds (local and external) in particular. In the past, a pronounced rise in US long rates has led to a significant correction in emerging bonds and currencies under the effect of a repatriation of capital and a tightening of monetary policies in emerging countries in order to remain attractive relative to the United States.”

“Since 2010, what will be observed is that emerging currencies are not greatly correlated to the US 10-year rate outside periods of intense strains, during which clearly there is strong correlation. Generally, we note that depending on the country, emerging currencies (against USD) are on occasion more sensitive to changes in local long rates, the dollar’s strength or commodity prices. For example, the tapering in 2013 led to a sharp rise in Hungarian 10-year rates on the back of that in US 10-year rates. However, the DXY dollar index fell during this episode, and it was the influence of the dollar that held sway on the Hungarian forint. In other words, the forint appreciated against the dollar during this period despite the sharp correction in Hungarian sovereign debt.”

“To determine the potential impact of a rise in the US 10-year rate on emerging currencies, we constructed an econometric model for each currency in which we force the use of the local 10-year rate and the DXY dollar index in addition to the other financial variables. We obtain the following estimated percentage changes for each currency for the two scenarios, i.e. strong dollar or weak dollar.”

“In scenario 1 (gradual rise in the dollar), all emerging currencies correct, in particular the South African rand, Polish zloty, Brazilian real and the Hungarian forint. Meanwhile, in the second scenario (fall in the dollar combined with resurgent protectionism and a decline in global trade), most currencies correct with the exception of the Hungarian forint, Polish zloty, Singapore dollar and Chinese yuan, these currencies seeming to be more sensitive to the US dollar than to rising US long rates.”


10:26 Gold losing the grip near $1,250.00/oz

The troy ounce of the precious metal is under pressure on Wednesday, trading on the defensive around the key $1,250 level.

Gold lower on USD-buying

Prices for the yellow metal are losing ground for the second session in a row today after being rejected from Monday’s tops above $1,257.00.

The firmer recovery of the buck, sustained on solid results from the US docket and supportive Fedspeak prompted Gold-bears to resurface and drag bullion back to the vicinity of $1,245 during early trade, where seems to have found some support.

Gold should stay under pressure ahead in the day with eyes on UK’s triggering of Article 50, US data and more Fedspeak (Williams, Rosengren and Evans).

Dallas Fed and voting member R.Kaplan (hawkish) said on Tuesday that more rate hikes are likely as long as the economy continues on its current track, while Governor J.Powell remarked the uncertainty that still prevails over Trump’s fiscal plans and their potential impact on the economy.

Gold key levels

As of writing Gold is retreating 0.43% at $1,250.15 facing the next support at $1,244.80 (low Mar.23) seconded by $1,243.19 (23.6% of March up move) and then $1,234.21 (38.2% of March up move). On the other hand, a surpass of $1,257.70 (high Mar.27) would open the door to $1,263.10 (2017 high Feb.27) and finally 1,307.00 (high Nov.2 2016).


10:25 UKs Hammond: Confident UK will not get a worst case outcome in Brexit negotiations

The UK chancellor Hammond is on the wires now, speaking in an interview with BBC Radio 4.

Key Headlines via Reuters:

Pivotal moment for Britain

Seeking very best deal possible

Have plans for day one after Brexit, which cover leaving EU in a ‘variety of ways

Confident UK will not get a ‘worst case’ outcome in Brexit negotiations

UK cannot cherry pick in Brexit talks

Cannot be member of customs union

Being a member has ‘consequences we cannot accept’

UK doesn’t recognize figure quoted for Brexit bill

Nobody wants to see hard border between N Ireland and Irish Republic after Brexit


10:22 GBP: Structural should outweigh the cyclical and it should fall further - HSBC

According to analysts at HSBC, it should be the spring of hope in UK for those who voted to leave the EU as not only are they expecting to take back control politically, but on top of this, growth has been resilient, inflation is picking up and there are signs that GBP is stabilising.

Key Quotes

“For the Remainers, despite the warmer weather, it looks increasingly like the winter of despair. In their eyes, the UK is moving closer to a hard Brexit. From this vantage point, inflation is driven by a lower GBP and higher import costs, real incomes are squeezed and the current account deficit remains wide.”

“This split has also been prevalent in financial markets. What should the market believe? The cyclical data, representing the best of times, which has held up well and makes GBP look undervalued; or the structural data, which shows the worst of times and tells us the currency still has further to fall.”

“For the last 25 years, the correct way to think about GBP was cyclically. In this mindset, inflation is driven by higher growth, so the market is right to expect tighter monetary policy. But just as with politics, we have entered a new era for GBP. Now, inflation is being driven by a weaker currency which has fallen because of the large current account deficit and political worries. This has led to a pick-up in imported inflation, causing a squeeze in real incomes, as wages struggle to keep up with prices. This should limit growth and leave the BOE less likely to hike.”

“GBP is driving inflation; inflation should not be driving GBP. The drivers are structural not cyclical. As such, the reaction function of GBP should be different.”

“While the markets are looking at the cyclical data and seeing the Light, we would argue for watching the structural data, which is still plunged in Darkness. The recent trade numbers do not yet show a clear sign of rebalancing. Until they do, we would look to sell the currency on the back of stronger cyclical data. We see GBP-USD falling to 1.10 by the end of 2017 and EUR-GBP rallying to parity.”


10:16 ECB: Exit strategy and a modern policy rule Deutsche Bank

Research Team at Deutsche Bank has built a policy rule to describe the ECB’s reaction function and to infer the future path of monetary policy. 

Key Quotes

“According to our strategists, current market valuations are consistent with QE tapering ending in the second half of next year. Markets seem to price in a deposit rate hike in Q2 2018 and a subsequent MRO hike in Q3 2019.”

“The combination of the ECB projections and our policy rules would suggest that markets are overly dovish. If the ECB Governing Council remains confident about their staff above-consensus projections, markets would have to bring forward (i) an increase in the deposit rate to the second half of this year, (ii) their expected QE termination date to the first half of 2018 and (iii) the first MRO rate hike to Q3 2018.”

“Naturally, using the less-optimistic consensus forecasts, the discrepancy is less accentuated – but markets do continue to appear moderately dovish.”

“We think the ECB will follow a gradual exit strategy:

  • June 2017: forward guidance could be changed by dropping the reference to lower rates and the language could be modified to allow the deposit rate to move independently of the MRO rate in the short term.
  • September 2017:  the ECB could announce (i) the start of QE tapering in January 2018 and (ii) a one-off 15-20bp deposit rate hike to be implemented by the end of the year.
  • Mid-2018: the QE tapering process ends. 
  • December 2018: the normal but gradual MRO rate hiking cycle begins.”

10:10 WTI hits fresh weekly tops near $ 49, awaits EIA report

Oil futures on NYMEX extend gains for the second straight session on Wednesday, now printing eight-day tops, as sentiment remains underpinned by concerns over Libyan supply disruptions and renewed hopes of an extension of the OPEC production cuts beyond June.

However, it remains to be seen if the black gold sustains the recent rebound, as rising inventory levels in the US continue to add to the omnipresent oversupply worries. The API crude inventory report published late-Tuesday showed a bigger-than expected build in the US stockpiles, rising by 1.91 million barrels.

Later today, the Article 50 trigger will garner a lot of attention and drive the risk trends, which will have a significant influence on risky assets such as oil. Meanwhile, the US EIA will release the official data on inventories in the American session.

WTI technical levels        

A break above $ 49 (psychological levels) could yield a test of $ 49.31 (200-DMA), beyond which $ 50 (key resistance) could be tested. While a breach of support at $ 47.50 (psychological levels) would expose the 4-month lows of $ 47.01, below which downside opens up for a test of $ 46.50 (classic S2/ Fib S3).

 


10:05 USD/CAD retreats from tops, back near 1.3380

The greenback has lost some upside feeling vs. its Canadian neighbor on Wednesday, now sending USD/CAD back to the 1.3380 area following the opening bell in Euroland.

USD/CAD upside capped in the low-1.3400s

After advancing to fresh tops beyond the 1.3400 handle late on Tuesday, the pair met some selling pressure and has now slipped back to the 1.3385/80 band despite the continuation of the USD recovery.

Spot is thus advancing for the second consecutive session, prolonging the bounce of Monday’s lows in the proximity of 1.3320 although finding some tough resistance around the Fibo retracement of the 2017 up move just above 1.3400 the figure.

Recent CAD weakness was accentuated by the dovish tone from BoC’s S.Poloz at his press conference following his speech on ‘Canada’s economic history’ on Tuesday, leaving the BoC-Fed policy divergence as the main driver behind the pair’s price action seconded by crude oil dynamics.

On the data front, absent releases in Canada should leave the bulk of the attention to the US docket, with Pending Home Sales, the EIA’s weekly report on crude oil inventories and speeches by Chicago Fed C.Evans (voter, dovish), Boston Fed E.Rosengren (2019 voter, dovish) and San Francisco Fed J.Williams (2018 voter, centrist) all expected later.

USD/CAD significant levels

As of writing the pair is losing 0.04% at 1.3379 and a break below 1.3351 (low Mar.28) would aim for 1.3319 (low Mar.27) and finally 1.3298 (100-day sma). On the other hand, the initial hurdle lines up at 1.3402 (23.6% Fibo of the 2017 upside) followed by 1.3415 (high Mar.28) and then 1.3496 (high Mar.14).


09:47 France Consumer Confidence meets expectations (100) in March


09:42 GBP/USD heavy sub-1.2400, Article 50 trigger in focus

The GBP/USD pair has come under renewed selling pressure, and wavers just below 1.24 handle, as the London traders hit their desk and dump the pound, reacting to the overnight reports that the UK PM May has signed the Article 50 letter.

This implies that the formal process for the Britain to leave the EU has been initiated, with all eyes now  on the UK PM May’s speech and EU President Tusk’s press conference, after British Ambassador Tim Barrow delivers May’s letter to EU’s Tusk.

Cable remains heavily offered as markets clear out their GBP long positions after the recent run-up to 1.2600 levels, as they remain wary over a potential ‘Hard Brexit’ landing, should  the UK fail to clinch a deal to maintain access to the EU single market.

GBP/USD Levels to consider            

Jim Langlands at FXCharts explains, “Any technical levels seem rather redundant today although the short term momentum indicators are pointing lower, and back below 1.2420 could see a run towards 1.2350, possibly a fair bit lower. On the topside, resistance will be seen at 1.2500 and at the session high of 1.2595, which lies just ahead of the major trend resistance at 1.2640. Aside from Brexit, month-end flows, particularly into /out of the Euro could make for a very choppy session. Stand aside.”

 


09:32 US Dollar testing highs near 99.70 ahead of Fedspeak

The greenback – measured by the US Dollar Index – is extending its bounce off recent lows to the 99.65/70 band, or session peaks.

US Dollar attention to data, Fedspeak

After hitting fresh 4-month lows in the mid-98.00s on Monday, the index sparked some buying interest and has not only regained the 99.00 handle but also managed to keep the advance well and sound towards current levels around 99.60.

USD found dip buyers near the critical 200-day sma around 98.50 earlier in the week, while a robust print from CB’s Consumer Sentiment and hawkish messages from Tuesday’s Fed-speakers collaborated with the upside momentum.

In the US data space, Pending Home Sales will be the sole data release later today along with speeches by Chicago Fed C.Evans (voter, dovish), Boston Fed E.Rosengren (2019 voter, dovish) and San Francisco Fed J.Williams (2018 voter, centrist).

US Dollar relevant levels

The index is up 0.13% at 99.66 and a break above 99.81 (high Mar.24) would aim for 100.27 (high Mar.20) and then 100.63 (20-day sma). On the flip side, the next support aligns at 98.67 (low Mar.27) followed by 98.62 (200-day sma) and finally 98.31 (10-month support line).


09:30 SSA Market: The long game - Rabobank

Research team at Rabobank notes that one of the Eurozone’s most prominent and youngest SSA issuers has been touted for an even larger role in Europe.

Key Quotes

“The possibility of turning the ESM into a vehicle that would ultimately replace the role of the IMF in future rescue programmes.”

“One of the key considerations as regards the feasibility of such a development is the size and flexibility of the ESM’s current lending capacity. As a purely theoretical exercise we examined the total outstanding amount of IMF debt to Eurozone countries to first see what exposure the IMF continues to have across the region and then assessed whether the ESM has the capacity to absorb this amount.”

“We found that the ESM has both the capacity and flexibility in terms of its funding facilities to absorb the IMF’s existing exposure and would thus face little challenge in taking over the IMF’s role in terms of the size and scope of current funding exposures. We do however anticipate challenges as regards the political impartiality that the issuer may have when dealing with bailout programmes and member states.”

“Last week also saw the release of the EFSF/ESM’s latest quarterly update which revealed that both issuers were ahead of Q1 targets as regards the combined EUR57bn funding needs for 2017. Demand for EFSF and ESM bonds has been strong, with longer dated paper offering attractive new issue premiums. For its part, the ESM started the quarter with a 30-year bond raising EUR3.5 billion. The quarter’s funding target was completed with a 10-year bond placed on 7 March which saw EUR3 billion issued on the back of strong demand enabling EUR1.obn of pre-funding.” 

“The EFSF issued across the curve in Q1 starting with a 6y EUR3.0 bn deal followed by a 26-year bond. A dual-tranche transaction completed the quarter with a 4y and a 39y bond. The February 2056 bond is the EFSF’s longest issuance to date. A total of EUR9.5bn was raised over the quarter which saw EUR500mn prefunded going into Q2. Combined, the EFSF/ESM raised EUR200mn in N-Bonds.”


09:25 US equities expensive and vulnerable to fading Trump-related optimism - AmpGFX

In view of Greg Gibbs, Director at Amplifying Global FX Capital, the USA stock market may appear relatively expensive to other markets. 

Key Quotes

“The Republican-led Congress failed to deliver reform on healthcare.  Tax policy reform may be just as difficult to construct with different views on a border tax and budget control.  The debt ceiling problem looms again, and the Trump team faces an ongoing Senate inquiry and FBI investigation into its alleged Russia links.”

“The USA stock market may appear relatively expensive to other markets.  US equities have vastly out-performed other countries’ since around 2010/12, indicative of its progress towards returning to more normal economic conditions in the wake of the Global Financial Crisis in 2007/08 and the Great Recession of 2009/10. Its P/E ratio based on year-ahead earnings estimates of over 18 is around the high since 2002, and high relative to other major markets.”

“Global equities have rallied sharply since the election of Trump, so it is hard to say there is a specific Trump bump in USA equities related to optimism that Trump can deliver growth-boosting reforms, such as a tax policy overhaul and reduced business regulation.  Nevertheless, it may be the case that USA stocks start to under-perform if doubts grow over the capacity of the Trump administration and Republican-led Congress to deliver reform.”


09:20 AUD/NZD is just marginally below fair value Westpac

Sean Callow, Research Analyst at Westpac, suggests that their short term fair value estimate of AUD/NZD has not been below 1.10 since July 2016 and rose as high as 1.15 in November before easing back to 1.13 by late March 2017, cooling slightly in line with coking coal and iron ore prices.

Key Quotes

“The gap between the spot rate and 1.13 fair value is a function of both yield spreads and relative commodity prices.”

“This is key to our expectation that AUD/NZD will resume its up trend in coming weeks, though we don’t expect the gap to be fully closed any time soon. Fair value estimates are always a simplification of a currency pair’s fundamental drivers, so deviations from the spot rate can persist for some time.”

“The current phase of AUD/NZD undervaluation has been both unusually large and sustained, though the narrowing of the gap in recent weeks increases our confidence in the model estimate.”


09:19 FX option expiries for today NY cut

FX option expiries for today NY cut at 10:00ET, via DTCC, can be found below. 

EURUSD: 1.0675 (EUR 402m) 1.0710 (435m) 1.0730 (578m) 1.0750 (404m) 1.0800 (306m) 1.0900 (257m) 1.0960 (204m) 

USDJPY: 109.80-90 (USD 395m) 110.00 (240m) 110.80 (635m) 111.00 (456m) 112.00 (656m) 112.20 (360m) 112.40-50 (780m)

GBPUSD: 1.2500 (GBP 185m) 1.2550 (310m)

EURGBP 0.8750 (EUR 205m)

AUDUSD: 0.7470 (AUD 525m) 0.7500 (420m) 0.7550 (195m) 0.7597 (685m) 0.7740-50 (395m)

USDCAD  1.3275 (USD 225m) 1.3300 (351m) 1.3350-60 (275m)  1.3550 (240m)

NZDUSD 0.6950 (NZD 205m)

EURJPY 120.50 (EUR 220m)


09:16 USD/JPY supported above 111 amid resurgent USD demand

Fresh bids emerged just ahead of 111 handle in early Europe, allowing a tepid bounce in USD/JPY over the last hour, as the greenback picks-up pace across the board. The USD index broke higher from the Asian consolidation box and now prints fresh daily tops at 99.65 levels, up 0.11% on the day.

The bid tone behind the US dollar gained momentum after GBP/USD met fresh supply, with the European traders hitting their desks and unwinding their GBP longs, as the Article 50 trigger looms.

The Article 50 trigger is expected to drive the sentiment in the day ahead, which will have a significant impact on the yen markets. Besides, the US pending home sales data and Fedspeaks could also have some bearing on the major.

USD/JPY Technical levels to watch             

The major finds immediate resistance at 111.40/50 (10-DMA/ psychological levels). A break above the last, the major could test 111.91 (classic R2/ Fib R3) and 112.79 (20-DMA) beyond the last. While to the downside, the immediate support is seen at 110.98/84 (5-DMA/ daily pivot) next at 110.50/46 (classic S1) and below that at 110.18/00 (Fib S2/ zero figure).

 


09:01 Switzerland UBS Consumption Indicator rose from previous 1.43to 1.5 in February


09:01 Germany Import Price Index (YoY) above expectations (7%) in February: Actual (7.4%)


09:00 EU Brexit negotiator determined to secure citizenship rights

The European Union’s (EU) chief Brexit negotiator, Michel Barnier, has told a delegation of EU citizens living in the UK and UK nationals living in Europe that he hopes to have an agreement in principle to secure their future by the end of the year, the Guardian reports on Wednesday.


08:57 Markets biggest focus on the UK governments triggering of Article 50 today Danske Bank

In view of the analysts at Danske Bank, the biggest focus for the markets today will be the UK government’s triggering of Article 50 and the response by the EU.

Key Quotes

“The UK is expected to send a Brexit letter to the EU following a cabinet meeting at 9:00 CET, followed by a response from Donald Tusk on the EU side once he receives the letter. This will mark the start of a negotiation period of up to two years, which may get off to a difficult start as there appear to be differences of views between the UK and EU about the focus of the discussions from the outset. One of the likely casualties of the ‘divorce’ talks will in our view be the GBP, which is indeed trading weak this morning, but the wider UK economy has also recently showed signs of ‘Brexit stress’, with consumers turning more pessimistic.”

“In Asia, the markets do not appear to be have been hit by Brexit fears yet as they are generally trading on a positive note this morning. One of the driving forces for the positive risk sentiment is probably the very strong US consumer sentiment number, which was released yesterday.”


08:48 Forex Today: GBP dumped as Article 50 trigger looms

The Asian session this Wednesday was dominated by the GBP sellers, hammering cable and GBP crosses across the board, as the UK PM May is set to pull the trigger to formalize Britain’s exit from the EU later today, after she signed the Article 50 letter earlier on the day. Meanwhile, the US dollar consolidated the previous heavy gains, leaving most majors in tight trading ranges.

In the day ahead, all eyes will remain on the developments surrounding the Article 50 trigger by the UK PM Theresa May, with the Article 50 letter already signed by May to be delivered by Tim Barrow today at 11:30 GMT. Thereafter, the European Council (EC) President Donald Tusk will hold a press conference at 13:45 GMT on the UK Article 50 notification.

On the data-front, we have a light session ahead, while the pending home sales data will be reported in the NA session. Also, FOMC member Evans speech is due on the cards later today.

Main topics in Asia

GBP/USD and crosses beaten up as Brexit looms

Sterling crosses are taking a beating with GBP/USD extending losses, GBP/JPY to a lesser degree, although EUR/GBP spiking on the day so far to 0.8763, and GBP/AUD on its knees to 1.6179 so far.

China Beige Book: Economy steady for now, but concern on momentum

China Beige Book International published earlier on the day showed that the Chinese economy held steady in the first quarter.

Gold offered near $ 1252 in Asia, despite Brexit concerns

Gold prices on Comex stalled its minor overnight recovery mode and resumed declines in the Asian session, as positive equities and treasury yields dampen the safe-haven demand for the bullion.

Trump: Important to get infrastructure done

The US President Trump was on the wires earlier today, via Reuters, speaking at a reception for senators.

Key focus for the day ahead

All you need to know about UK’s Article 50 trigger

The historic triggering of the Article 50 by the UK PM Theresa May is just a few hours away, with the PM having already signed the Article 50 letter, which will be delivered by Tim Barrow today at 11:30 GMT. 

EC’s Tusk to release draft Brexit guidelines for Barnier by end of Friday - BBG

According to three people familiar with the matter, the European Council (EC) President Donald Tusk is expected to publish draft guidelines for Brexit Chief Barnier by the end of this week after the UK PM May triggers the Article 50 today, Bloomberg reports.

UK: Time has finally come for Theresa May to trigger Article 50 - TDS

Research Team at TDS points out that the time has finally come for Theresa May to trigger Article 50, kicking off a two-year negotiating period with the rest of the European Union (EU27).

Trump said to meet with Cohn on Thursday to discuss tax overhaul - BBG

Bloomberg quotes three people familiar with the meeting that the US President Trump is expected to meet with Gary Cohn, head of the National Economic Council, on Thursday to discuss tax overhaul.

 


08:38 EUR/USD weaker, stays close to 1.0800

The selling interest remains unchanged around the single currency on Wednesday, now sending EUR/USD to test the lower bound of the daily range near the key support at 1.09800 the figure.

EUR/USD lower as USD keeps recovering

Spot continues to retrace the recent upside to fresh multi-month tops just above the 1.0900 handle seen on Monday, so far shedding over a cent and poised to challenge the key support at the 1.0800 mark.

Solid results from the US docket yesterday plus supportive Fedspeak gave the buck further excuses to extend its rebound from the mid-98.00s (Monday’s low) when tracked by the US Dollar Index (DXY).

In fact Dallas Fed R.Kaplan (voter, hawkish) said on Tuesday that rates should raise ‘gradually and patiently’, while added that he would support more rate hikes as long as the economy stays on the current track. In the same direction, US Consumer Confidence gauged by the Conference Board rose to the highest level since December 2000 at 125.6 for the month of March.

Looking ahead, it will be all about Article 50 during the European session, with PM Theresa May expected to speak at 1345GMT. Across the pond, Pending Home Sales will be the sole data release along with speeches by Chicago Fed C.Evans (voter, dovish), Boston Fed E.Rosengren (2019 voter, dovish) and San Francisco Fed J.Williams (2018 voter, centrist).

EUR/USD levels to watch

At the moment the pair is losing 0.07% at 1.0806 facing the immediate support at 1.0794 (low Mar.27) ahead of 1.0759 (low Mar.24) and finally 1.0704 (low Mar.16). On the flip side, a break above 1.0873 (high Mar.28) would target 1.0877 (200-day sma) en route to 1.0905 (high Mar.27).


08:28 RBNZ: Market pricing for rate hike by end- 2017, back to about 35-40% - Westpac

Sean Callow, Research Analyst at Westpac, notes that the market pricing for a RBNZ rate hike by end- 2017 had been 100% in the early weeks of 2017 but is now back to about 35-40% chance.

Key Quotes

“At its March interest rate decision, the RBNZ kept the OCR on hold at 1.75% as fully expected.”

“The statement was received very calmly, as it showed little change from February. Our NZ Economics team notes the RBNZ expects the cash rate to remain low for a considerable period (the forecasts published in February suggested no change until late 2018).”

“The outlook for the New Zealand economy remains positive, but the risks around the global environment are seen to the downside. RBNZ Governor Wheeler has expressed his concerns about US president Trump’s policy agenda and the potential impact on New Zealand. The RBNZ also highlighted significant excess capacity in the global economy and low core inflation.”

“The RBNZ remained positive on the domestic economy, playing down the slowdown in Q4 GDP growth.”


08:24 UK: Time has finally come for Theresa May to trigger Article 50 - TDS

Research Team at TDS points out that the time has finally come for Theresa May to trigger Article 50, kicking off a two-year negotiating period with the rest of the European Union (EU27).

Key Quotes

“A letter will be hand-delivered at 12:30pm BST today by Sir Tim Barrow (the UK’s Permanent Representative to the EU in Brussels) to European Council President Donald Tusk. The UK’s letter is unlikely to contain much new information beyond what has already been published by the government, but it’s possible we will get a brief EC response ahead of a more full-fledged response later this week.”

“As the negotiation phase begins, progress will initially be quite slow—the EU27 leaders won’t meet to discuss their negotiating strategy until the end of April. Both sides are likely to lay out quite firm views in the early days of negotiations before gradually working towards a more constructive middle-ground from where both parties will be able to claim victory.”

“We don’t expect much impact on GBP today from this act, as the UK government has heavily trailed this action.”


08:08 ECs Tusk to release draft Brexit guidelines for Barnier by end of Friday - BBG

According to three people familiar with the matter, the European Council (EC) President Donald Tusk is expected to publish draft guidelines for Brexit Chief Barnier by the end of this week after the UK PM May triggers the Article 50 today, Bloomberg reports.

The sources noted that Tusk’s guidelines for Barnier will probably limit the scope of the upcoming talks to the terms of the divorce and not include a future trade relationship with the UK.

Tusk’s guidelines will be sent to the 27 remaining members of the EU for discussion and ratified at a summit of leaders on April 29 in Brussels, after which they will set the framework for the negotiations.


07:59 Trump said to meet with Cohn on Thursday to discuss tax overhaul - BBG

Bloomberg quotes three people familiar with the meeting that the US President Trump is expected to meet with Gary Cohn, head of the National Economic Council, on Thursday to discuss tax overhaul.


07:50 AUD/USD: Upside stalls once again near 0.7655

The AUD/USD pair keeps the bid tone intact, but struggle to take out the offers lined up just ahead of 0.7650 barrier so far this week, as the bulls await a key determinant for the next push higher.

The upside in AUD/USD lacks momentum, largely on the back of underlying weakness seen in the base metals, particularly copper. Meanwhile, renewed buying interest seen behind the greenback versus its major peers, in response to solid US macro data and hawkish Fedspeaks, also keeps the prices in check.

Also, increased nervousness heading into the Article 50 trigger adds to the side-ways movement seen in the Aussie. Data-wise, nothing relevant for the major except for the US pending home sales lined up for release in the NA session.

AUD/USD Levels to watch   

At 0.7644, the pair finds the immediate support located at 0.7605/01 (Mar 27 & 24 low). Selling pressure is likely to intensify below the last, dragging the Aussie to 0.7550 (200-DMA/ psychological mark) and below that 0.7515/00 (100-DMA/ zero figure). On the flip side, the immediate resistance at 0.7657/58 (daily high/ 10-DMA) above which gains could be extended to the next hurdle located 0.7692/0.7700 (Mar 22 high/ round number) and 0.7752 (4-month tops).

 


07:39 RBA cash rate to remain at 1.5% throughout both 2017 and 2018 - Westpac

Sean Callow, Research Analyst at Westpac, points out that Westpac’s base case is that the RBA cash rate remains at 1.5% throughout both 2017 and 2018 and they see risks to this view skewed more to a rate cut than to a hike, as growth in 2018 could disappoint.

Key Quotes

“The RBA held the cash rate at 1.5% in March and maintained a neutral outlook in its statement. This was fully expected.”

“The statement showed increased optimism over the global outlook, reiterating that, “(t)he improvement in the global economy has contributed to higher commodity prices, which are providing a boost to Australia's national income.”

“The RBA noted the strong rebound in growth in Q4 2016 and said “business and consumer confidence are at, or above, average.” But while consumption growth picked up in Q4, “growth in household income remains low.” Indeed, the tone of the minutes was a bit cooler than the statement, including noting weakness in the job market beyond the headline numbers.”

“Markets price only a tiny risk of a cut by September 2017 and then toy with the idea of a rate rise by year-end (10-15% chance).”


07:33 US: Consumer confidence is going gangbusters - ANZ

According to research team at ANZ, US consumer confidence is going gangbusters as the Conference Board consumer confidence for March spiked to 125.6 (114 expected) with the take on the present and future situation each up around 10 points.

Key Quotes

“The headline reading is the highest since late 2000. The labour differential rose to 12.2 from 7.0, moving through its 2007 peak, with the proportion of people reporting jobs are “plentiful” seeing its biggest monthly gain in 43 years, while the proportion saying they are “hard to get” continued its downward trend. The Fed will be watching closely to see if confidence translates into spending, with reports of tough times in US retail.”

“Personal income and expenditure data released later this week is expected to show modest consumption, with income and expenditure seen at 0.4% m/m and 0.2% m/m respectively (but economists may be revising up these expectations as we speak).”

“US household debt as a proportion of disposable income has been steadily declining (down about 30 percentage points) since its 2008 peak, suggesting a bit more headroom to borrow, should consumers (and banks) feel so inclined.”


07:29 AUD/NZD: Buy dips in the cross - Westpac

Sean Callow, Research Analyst at Westpac, explains that the RBNZ’s pushback against market pricing for a 2017 rate hike and outperformance of Australia’s commodity export basket over New Zealand’s sparked a steep rally in AUD/NZD from early February to mid-March.

Key Quotes

“We have long argued that the pair was undervalued so view the move as largely catch-up to fundamentals. Some consolidation in recent days doesn’t change our underlying inclination to buy dips in the cross.”

“Our preferred buy zone is near 1.0750, targeting 1.10+. Whether AUD/NZD dips as far as 1.0750 in coming weeks probably depends on increasingly volatile iron ore prices and broad risk appetite, with AUD showing itself to be more sensitive to US equities than NZD. An overhang of long AUD futures positions may weigh on AUD/NZD near term.”

“Relative monetary policy should offer limited direction for the pair near term, with both RBA and RBNZ firmly on hold. But yield spreads continue to argue for a stronger Aussie.”


07:23 Russias Putin: Russia to enhance oil and gas industry cooperation with Iran

Russia’s President Vladimar Putin said late-Tuesday at a joint news conference which followed the meeting with Iran's president, Hassan Rouhani, Russia sees “a great potential for enhanced oil and gas industry cooperation,”RT news reports.

 He added that “leading Russian companies have reached a number of important agreements concerning the development of major hydrocarbon deposits in Iran.”  


07:15 S&P: Small risk that Chinese property market curbs will overshoot

The US ratings agency, S&P, came out with the headlines on China’s property markets, noting that there is small risk that the Chinese property market curbs will overshoot.


07:04 Chinese financial conditions are at their tightest in more than 1 year - Westpac

Strategists at Westpac came out with a latest note on the Chinese financial conditions, noting that Chinese financial conditions are at their tightest in more than 1 year.

Key Points:

Chinese financial conditions are at their tightest in more than 1yr; keep an eye out for signs of slower activity data in the months ahead


06:58 All you need to know about UKs Article 50 trigger

The historic triggering of the Article 50 by the UK PM Theresa May is just a few hours away, with the PM having already signed the Article 50 letter, which will delivered by Tim Barrow tomorrow at 11:30 GMT. Thereafter, the European Council (EC) President Donald Tusk will hold a press conference at 13:45 GMT on the UK Article 50 notification.

The UK PM May finally invoking the Article 50 means the process of the Britain to exit EU’s membership commences, after the referendum vote held in June  last year showed Brits favoring a Brexit by 51.9% to 48.1%.

What is Article 50?

Article 50 was created as part of the Treaty of Lisbon - an agreement signed up to by all EU states which became law in 2009. 

Article 50 outlines the process of leaving the EU and states: “Any Member State may decide to withdraw from the Union in accordance with its own constitutional requirements.”

When will the Article 50 be triggered?

Earlier this month, the UK PM May informed the European Union (EU) that she wants to initial the formal process of leaving the EU on March 29th, so that the UK can be out of the EU by the summer of 2019, depending on the precise timetable agreed during the negotiations.

What next after Article 50 trigger?

Once the Article 50 is triggered later today, the terms of Britain's exit will have to be agreed by 27 national parliaments, a process which could take some years. Some EU leaders believe, it could take as long as 5 years to agree to new trading and immigration policies with the remaining countries In the meantime, the UK will continue to abide by EU treaties and laws.”

Responding to May’s announcement, Mr Tusk tweeted: “Within 48 hours of the UK triggering Article 50, I will present the draft Brexit guidelines to the EU27 Member States.”

Timeline post-Article 50 trigger (via the Sun)

MARCH 31: Donald Tusk will give the EU’s remaining 27 member states’ initial response to Mrs May.

APRIL 29: Emergency summit of the 27 EU leaders to agree on the mandate for their lead negotiator Michel Barnier to conduct exit talks.

MAY 7: French presidential elections final run-off. Many believe serious talks cannot begin until we know who the next French president is.

MID MAY: Michel Barnier draws up EU’s negotiating guidelines based on the mandate given to him. The EU’s council of foreign ministers meets to sign them off.

LATE MAY/EARLY JUNE: Face-to-face Brexit negotiations between Britain and the EU begin.

SEPT 24: German elections, to decide if Angela Merkel continues as Chancellor or is ousted. Difficult for much to be agreed on Brexit until then.

OCTOBER 2018: Both sides want to conclude negotiations six months before Britain leaves the EU to give the Houses of Commons and Lords, as well as the European Parliament and other national assemblies, time to ratify the final Brexit deal.

Why is Article 50 trigger such a historic moment?

The UK will be the first member to leave the EU, once the Article 50 is triggered. The UK’s departure is expected to stir political tensions, as the post-Brexit trade deal and negotiations is likely to be more complicated since it needs the unanimous approval of more than 30 national and regional parliaments across Europe.

We could see a ‘soft’ Brexit landing if the UK agrees to compromise on issues like the free movement of people in order to maintain access to the EU single market. Contrarily, a ‘hard’ Brexit would be inevitable, in case the UK fails to reach a deal for the single market access with the EU.

 GBP/USD bounces-back above 1.2400, eyes on Article 50 trigger

The GBP/USD pair has managed to find some bids near 1.2380 region, now taking on the recovery back above 1.24 handle, as investors gear up for the historic moment. The sell-off in GBP kicked-off, as the Japanese traders hit their desks and reacted to the reports of the UK PM May signing the Article 50 letter.

GBP/USD Levels to consider            

Valeria Bednarik, Chief Analyst at FXStreet explains, “The pair has an immediate support at 1.2430, the 38.2% retracement of the January rally, with a break below it favoring additional declines towards the 1.2330/50 region. The 4 hours chart shows that the price broke below its 20 SMA which lost its upward strength and veered lower around 1.2520, whilst technical indicators have turned south, entering bearish territory or the first time in a week with sharp bearish slopes, favoring additional declines that can extend down to 1.2345, February monthly low and the 50% retracement of January's rally.”

 


05:50 German Govt wants Brexit talks to be completed within 2 year limit - Bild

Livesquawk reported headlines from the Bild, citing that the German Gov’t wants Brexit talks to be completed within 2 year limit.


05:46 China Beige Book: Economy steady for now, but concern on momentum

China Beige Book International published earlier on the day showed that the Chinese economy held steady in the first quarter.

Key Points:

Real estate and commodities increasingly wobbly & adding to high debt-levels

Policy focus has held back China's goal of shifting to consumption, services and high-tech industries

Best performers, biggest beneficiaries have been state industrial firms, not private companies

"China's doing everything in its power to keep growth up. But that's meant backtracking on rebalancing the economy"

"When they finally decide to do it, it's going to be even more painful"


05:28 Gold offered near $ 1252 in Asia, despite Brexit concerns

Gold prices on Comex stalled its minor overnight recovery mode and resumed declines in the Asian session, as positive equities and treasury yields dampen the safe-haven demand for the bullion.

Gold: Article 50 trigger in focus

Currently, gold drops -0.60% to $ 1247.55, having posted daily highs at $ 1251.85 and a day’s low at $ 1246.50. Gold prices fail to benefit from the looming concerns surrounding the Article 50 triggering, after the UK PM May signed the Article 50 letter.

The yellow metal also remains under pressure, as the greenback continues to consolidate yesterday’s heavy gains versus its main competitors, triggered by upbeat US economic releases, thus, keeping sentiment underpinned around the treasury yields.

Markets now look forward to the Article 50 trigger scheduled later today, which could provide some impetus to the metal, while the US pending home sales data and Fedspeak will keep the traders busy in the NA session.

Comex Gold Technical Levels                                  

The metal has an immediate resistance at 1251.85/96 (daily high/ 5-DMA) and 1255.70 (daily pivot). Meanwhile, the support stands at 1243.91 (200-DMA) below which doors could open for 1240 (round number).

 


05:10 EUR/USD Bears take a breather, stays above 1.0800

The EUR/USD pair has entered a phase of downside consolidation so far this session, clinging to the 1.08 handle, as the bears take a breather after the overnight sell-off.

The major remains better bid and manages to keep 1.08 handle, largely underpinned by cross-driven strength. Strong gains seen in EUR/GBP in the wake of the GBP sell-off amid Brexit concerns, as investors gear up for the historic Article 50 triggering during London hours.

More so, mixed tone seen in the Asian indices combined with stalled USD buying helps keep the sentiment around EUR/USD buoyed somewhat.

The spot witnessed aggressive selling in the last US session, following the release of better-than expected US macro data and on hawkish comments from Fed officials Kaplan and Evans, which triggered a sharp USD rally across the board.

Later today, all eyes will remain on the Article 50 trigger by the UK PM May amid a light economic calendar, with the only US pending home sales and FOMC member Evans speech on tap.

EUR/USD Technical Levels   

Valeria Bednarik, Chief Analyst at FXStreet explains, “The 4 hours chart shows that the price is breaking below a bullish 20 SMA, which reinforces the Fibonacci resistance area, whilst technical indicators have retreated from near overbought readings, maintaining bearish slopes and entering bearish territory. Below 1.0790 the corrective movement can extend down to 1.0735,  while back above 1.0830, the pair has scope to extend its gains up to 1.0930, this last the 61.8% retracement of the post-US election's decline. Support levels: 1.0780 1.0735 1.0700 Resistance levels: 1.0830 1.0870 1.0905.”

 


04:49 Moodys: China s economy to face heightened risks from a potential future property downturn

The US-based ratings agency, Moody’s Investors Service, published its latest report on China, titled “Economy at higher risk from potential property downturn"

Key Points:

China's economy would face heightened risks from a potential future property downturn compared to when Moody's previously analyzed the macroeconomic importance of the country's real estate sector in 2014

At the same time, the scope of the Chinese authorities for mitigating such an impact through fiscal and monetary policy has become more limited

"Around 25%-30% of China's GDP are connected to final demand from the property and construction sectors," says Michael Taylor, a Moody's Managing Director. "This creates the potential for developments in the property market to have large macroeconomic effects."


04:43 Trump: Important to get infrastructure done

The US President Trump was on the wires earlier today, via Reuters, speaking at a reception for senators.

Key Headlines:

We are going to make a deal on healthcare very quickly

Will talk about infrastructure, important to get done


04:26 USD/JPY subdued and consolidates at 111.20 and strong overnight-recovery

Currently, USD/JPY is trading at 111.13, down 0.00% on the day, having posted a daily high at 111.26 and low at 111.02.

Forex today: improved risk sentiment across the board, GBP/USD worst performer

USD/JPY is relatively subdued considering the change of tides overnight. U.S. stocks rallied on improved optimism on Wall Street today for the US economy. This was helped along by very strong consumer confidence data. The US US Consumer Confidence (CB) index surged to its highest level in over 16 years, reaching 125.6 from as low as 116.1 in February.

Wall Street rebounds amid positive data

Stocks rallied and the yen tumbled. The Dow Jones Industrial Average added 150.52 points, or 0.73%, to 20,701.50, the S&P 500 rose 13.75 points, or 0.6%, to 2,352.00 and the Nasdaq Composite gained 34.77 points, or 0.6%  to 5,875.14.  The 10-year note benchmark was up to 2.41% and USD/JPY broke through the 111 handle with stops triggered.

USD/JPY levels

Valeria Bednarik, chief analyst at FXStreet explained that in the 4 hours chart, technical indicators have turned sharply higher:  "Momentum and the RSI are entering positive territory, but the price still developing well below its 100 and 200 SMAs. The pair has a major resistance at 111.60, where selling interest will likely reappear."


04:16 PBOC sets USD/CNY central rate at 6.8915 vs 6.8782

PBOC sets USD/CNY central rate at 6.8915 vs 6.8782


04:02 EUR/GBP: capped in hard rally to key resistance at 0.8738, 0.8774 next?

Currently, EUR/GBP is trading at 0.8716, up 0.38% on the day, having posted a daily high at 0.8739 and low at 0.8678.

Sterling has taken a hit in early Asia and the pace picked up as we approached the Tokyo open. The crosses were led by GBP/AUD although EUR/GBP triggered stops and smashed through the 0.87 handle and up to test a key resistance level where it has stalled.

While markets are fully aware that the UK is leaving the EU, it appears there was still some long sterling business to be covered ahead of the event cashing in in sterling;s recent strength.

 UK PM May signs Article 50 letter

The UK PM Theresa May has already signed the letter, she did so overnight.  The British ambassador, Sir Tim Barrow, is due to deliver it to EU's Donald Tusk around 12GMT. Tusk holds a press conference announcing that the negotiations will formally begin in the process of separating Britain from the European Union. 

EUR/GBP levels

Analysts at Commerzbank noted that the Initial resistance lies at 0.8738 and 0.8774 (downtrends). They suspect that this will cap for now. "Above 0.8800, there is scope to tackle the 0.8852 January high. We look for the downside currently to be limited by the 200-day ma at .8571."


03:43 US dollar medium-term fundamental outlook - Westpac

Analysts at Westpac offered their outlook for the dollar 3 months ahead.

Key Quotes:

"Incremental news continues to signal there will be less tangible Trump stimulus than many had assumed. The struggle to craft legislation for a new health care bill that can pass the House, where Republicans enjoy a strong 21 seat majority is just the latest example."

"Tax reform and infrastructure will potentially run afoul of the same challenging political realities in a few months: even if Senate filibuster risks can be dodged via the 2018 reconciliation bill (needing just a simple majority vote) the Republican party remains divided on infrastructure, border adjusted taxes and gutting government agencies. We suspect the USD will falter into mid-year, but resume its uptrend thereafter."


03:38 USD/CNY projection: 6.8986 - Nomura

Analysts at Nomura offered their projection for the USD/CNY fix today.

Key Quotes:

"Our model1 projects the fix to be 204 pips higher than the previous fix (6.8986 from 6.8782) and 128 pips higher than the previous official spot USD/CNY close of 6.8858. The basket implied change is 162 pips higher than the previous official spot USD/CNY close (6.9020 from 6.8858)."


03:29 GBP/JPY bears break below 138 handle, playing catch up with Sterling s weakness

Currently, GBP/JPY is trading at 137.64, down -0.54% on the day, having posted a daily high at 138.52 and low at 137.60.

Forex today: improved risk sentiment across the board, GBP/USD worst performer

Sterling crosses are taking a beating with GBP/JPY playing catch-up with the rest of the cross's bears first out of the blocks - that would be GBP/AUD. However, cable is now testing critical support levels on this move.

 UK PM May signs Article 50 letter

The UK PM Theresa May has already signed the letter and the British ambassador, Sir Tim Barrow, is due to deliver it to EU's Donald Tusk around 12GMT. Tusk holds a press conference announcing that the negotiations will formally begin in the process of separating Britain from the European Union. 

Meanwhile, USD/JPY is holding up in Tokyo after stops triggered a decent score on the 111 handle to 111.20 highs overnight with Wal Street on the march. Risk-on aided a recovery in the major unit that may slow down the crosses decline should bull's remain in control - hence GBP/JPY bears were last out of the blocks on this move in sterling just before the open. 

Article 50 to be triggered: "So what now?" - Westpac

GBP/JPY levels

GBP/JPY is now posting the lowest levels since Jan 16 earlier this year is reversing 86% of January's rally from 136.44 to 144.72. The cross is well below the 2017 support line at 138.50. On a correction, the 20-d sma is located at 138.63 to place the cross back into neutral territory. 

USDJPY: Selling rallies towards 111.70


03:12 GBP/USd and crosses beaten up as Brexit looms

Currently, GBP/USD is trading at 1.2384, down -0.54% on the day, having posted a daily high at 1.2464 and low at 1.2378.

Forex today: improved risk sentiment across the board, GBP/USD worst performer

Sterling crosses are taking a beating with GBP/USD extending losses, GBP/JPY to a lesser degree, although EUR/GBP spiking on the day so far to 0.8763, and GBP/AUD on its knees to 1.6179 so far.

UK PM May signs Article 50 letter

The markets were not kind to the pound overnight ahead of Brexit tonight. The UK PM Theresa May has signed the letter and the British ambassador, Sir Tim Barrow, is due to deliver it to EU's Donald Tusk around 12GMT before Tusk holds a press conference announcing that negotiations will formally begin in process of separation Britain from the European Union. 

Article 50 to be triggered: "So what now?" - Westpac

GBP/USD levels

Valeria Bednarik, chief analyst at FXStreet explained that the 4 hours chart shows that the price broke below its 20 SMA which lost its upward strength and veered lower around 1.2520. "Technical indicators have turned south, entering bearish territory or the first time in a week with sharp bearish slopes, favoring additional declines that can extend down to 1.2345, February monthly low and the 50% retracement of January's rally."

 


02:54 Japan Large Retailer s Sales declined to -2.7% in February from previous -1.1%


02:54 Japan Retail Trade s.a (MoM): 0.2% (February) vs previous 0.5%


02:52 Japan Retail Trade (YoY) came in at 0.1%, below expectations (0.5%) in February


02:37 US consumer confident enough? - ANZ

Analysts at noted that US consumer confidence spiked to 125.6, soundly beating expectations, with the highest headline reading since late 2000.

Key Quotes:

"But will it translate to stronger spending? Personal income and expenditure data will be released later in the week."

"US preliminary wholesale inventories also beat expectations, a double-edged sword for GDP."


02:15 Conference Boards Consumer Confidence stunner - Nomura

Analysts at Nomura noted a key driver for the US markets overnight on the data front.

Forex today: improved risk sentiment across the board, GBP/USD worst performer

Key Quotes:

"Conference Board’s consumer confidence index increased above expectations in March to 125.6 (Nomura: 115.0, Consensus: 114.0), its highest level since December 2000, from upwardly revised 116.1 in the previous month (previously reported as 114.8)."

"The Conference Board report suggests that consumer optimism improved further as consumer fundamentals remain healthy. The strong increase in the confidence index was driven by notable improvement in consumers’ assessment of both current and future conditions."

"The index of present situation jumped to 143.1 from 134.4. The expectations index also improved strongly to 113.8 from 103.9. The report also suggests that consumers’ assessment of job prospects also improved strongly. The labor differential index improved strongly to 12.2 from 7.0, as notably more respondents claimed jobs are “plentiful” while moderately fewer respondents claimed jobs are “hard to get” decreased moderately."


02:08 AUD/JPY thrives in risk-on environment, targets a break of 85 handle

Currently, AUD/JPY is trading at 84.89, up 0.06% on the day, having posted a daily high at 84.91 and low at 84.76.

Forex today: improved risk sentiment across the board, GBP/USD worst performer

AUD/JPY is up to challenge the 84.80/00 resistance area with risk-on and a better bid Aussie on the back of a turn around in metals. However, Imre Speizer, an analyst at Westpac argues that "fFurther out, though, the underlying AUD trend should be gently lower, as growing bulk commodity supply gradually cools the 2016 price surge. Iron ore should be back under $80/tonne by June, with further (modest) declines likely in H2 2017. (21 March)."

Meanwhile, economist, Kit Juckes, at Societe Generale is bullish on AUD/JPY, "USD/JPY is in no man's land, needing to form a clear base before yen sellers re-emerge. The lack of volatility and a yield-hunting environment generally, are conducive to that base being formed around here, and should support AUD/JPY as well as EUR/JPY."

AUD/JPY levels

AUD/USD bulls capped at 0.7650, too much too soon?

AUD/JPY broke the descending resistance line and the hourly 50 sma at 84.29. This is a correction of the 87.20 downtrend and a bounce off the 200-d EMA at 83.79. Further probes of the 85 handle open the door to 85.49 and 22nd March highs. The 8th March lows at 85.84 guard 86.05 21st March lows. 81.50 on the wide marks the summer 2016 highs as a key target below 82.60.


01:18 GOP committed to tax reform, risk-on - ANZ

Analysts at ANZ noted that risk sentiment and particularly equities rebounded for a second day after Paul Ryan said the GOP is “united” and committed to tax reform. 

Key Quotes:

"US equities rose, treasuries sold off, the USD was mixed, oil rebounded and gold was stable. Prior to the Ryan comments the market ignored the very strong US consumer confidence, suggesting US politics are still in the driving seat for markets. 

Financials are leading equity gains after being beaten up last week on concerns Trump’s regulation dismantling drive could hit snags, while energy shares are up on the rebound in oil prices. US yields are up a touch, while globally rates moves have been relatively muted. Oil gave up some of its earlier gains related to Libya pipeline woes, with near-dated WTI up 1.4% at the time of writing. Gold spot is currently unchanged at just under USD1,255/oz."


01:15 US Q1 GDP tracking estimate has been lowered - Nomura

Analysts at Nomura offered their GDP Q1 tracking update.

Key Quotes:

"Good trade balance was mostly in line with expectations, but February wholesale and retail inventories (released with good trade data via the Census Bureau’s Advance Economic Indicators Report) were weaker than expected, implying less inventory investment in Q1. Thus, our Q1 GDP tracking estimate has been lowered by 0.2pp to 1.1% from 1.3%. 

Moreover, downward revisions to wholesale and retail inventories in prior months in Q4 suggest inventory investment was weaker than the Bureau of Economic Analysis (BEA) had previously estimated. Reflecting these revisions, we are lowering our forecast for the BEA’s third (final) estimate of Q4 GDP growth by 0.1pp to 1.9% from 2.0%, which implies that the BEA would leave the Q4 GDP growth unrevised in the third estimate."


01:11 NZD/USD: range bound with a bearish bias, 0.6960 eyed

Currently, NZD/USD is trading at 0.7013, up 0.03% on the day, having posted a daily high at 0.7017 and low at 0.7009.

NZD/USD has been consolidating on the 0.70 handle, ranging between 0.7005 and 0.7045 after a pullback from the 0.7090 area on the 21st March where lows of 0.6999 were hit. Analysts at Westpac explained that there is potential for higher to the 0.7150-0.7300 area during the month ahead, as USD longs are pared. 

For markets overnight, the US dollar was striking back with a risk-on display on Wall Street and rising yields as markets continue to factor in rate hikes from the Fed this year. US 10yr treasury yields moved higher and rallied off 2.36% to 2.42%.

Forex today: improved risk sentiment across the board, GBP/USD worst performer

Data wise, the Consumer Board Consumer Confidence Index surged higher to 125.6 and beating expectations of an 114 print. The Richmond Fed manufacturing survey was also strong, rising 17 to 22 vs the 15 expected. In respect to Fed speakers, Chicago's Fed President Charles Evans and Dallas' Federal Reserve Bank President Robert Kaplan both advocated for further rate hikes this year. Yellen displayed a cautionary tone around the jobs sector noting persistently high unemployment.

"Further out, the Fed’s tightening cycle plus US fiscal expansion should maintain upside pressure on US interest rates and the US dollar, pushing NZD/USD down towards 0.6900," argued analysts at Westpac, adding,  "Weaker dairy prices plus the RBNZ’s emphatic reminders it is on hold for a long time should also weigh. (21 Mar)."

NZD/USD levels

NZD/USD's key first support is at 0.7005  while trading below the 200 smoothed sma at 0.7019. The next downside levels are 0.6950/60 and key supporting areas guarding 0.6880 and March lows. On the flipside, a drive higher through 0.7040 targets the double-bottom of potential resistance at 0.7130 on the 4hr chart in mid-Feb and late Fed business. 0.7245 comes as the late Jan/early Feb support and double top resistance Feb 16th and 23rd. 


00:28 Fed s Powell: Interest rate hikes won t have much impact on government borrowing costs.

Federal Reserve's Governor Jerome Powell is on the wires, via Reuters, saying that the central bank's interest rate hikes will not have much impact on government borrowing costs. Also, he added that having only four board members is a "marginal" number for accomplishing the work the Fed needs to do.


00:20 UK PM May signs Article 50 letter

UK's Prime Minister Theresa May has signed the Article 50 letter, which should be delivered by Tim Barrow tomorrow at 12:30 BST. Afterward, it's expected that EC's Donald Tusk will hold a press conference at 13:45 GMT.

At the time of writing, GBP/USD is trading at 1.2452, up 0.01% on the day, having posted a daily high at 1.2455 and low at 1.2446.


00:01 South Korea BOK Manufacturing BSI declined to 78 in April from previous 79


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