HotForex Forex News

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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Data source: FX Street
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