FX News Today

European Outlook: Asian stock markets moved broadly higher, following on from gains on Wall Street yesterday amid a rebound in oil prices. The front end WTI Nymex future has moved off highs, but remains comfortably above USD 41 per barrel and with the USD strengthening Japanese markets were also supported by a weaker Yen. The EUR has fallen below 1.14 to the USD and U.S. and European stock futures are also higher, pointing to opening gains on European markets and ongoing pressure on core bond futures. Italian banks will remain in the spotlight, after yesterday’s disappointment over Italy’s bad bank plan led to a sell off in Italian bank stocks. The calendar has ECBspeak from Knot, Nowotny and Constancio and data includes final inflation readings from Spain and France

UK inflation data came in perkier than expected: Rising to a cycle high of 0.5% y/y in the March headline CPI rate, up from February’s 0.3% and above the median forecast for 0.4%. Core CPI jumped to 1.5% y/y from 1.2% previously. Airfares and clothing drove the index higher, offsetting weakness in food and petrol prices. The impact of sterling weakness is likely to have started having some impact. From March 2015 to March this year the GBP lost over 3% versus the dollar and against the euro (a better proxy of the trade-weighted value of sterling) over 9%. Cable traded as high as 1.4330 following the news, but USD strength overnight sees the pair at 1.4245 currently.

Fedspeak, Harker & Williams: Harker warned that it’s possible there will still be 3 hikes this year, depending on GDP numbers. He doesn’t see much slack in the labor market and doesn’t want to see the Fed running much above the 2% target inflation rate. Harker warns that if energy prices rebound more quickly, it is possible that the Fed will have to be more aggressive on rates. Later, Williams said that the he wasn’t that concerned about a hard landing for China, with the U.S. economy doing “quite well,” though the Fed must take into account what happens abroad. He also commented that the worst-kept secret is the Fed’s plan to raise rates, as the Fed is trying to telegraph the path of U.S. rates so the rest of the world can better prepare. Meanwhile, he’s not seeing big capital flight from emerging economies as the Fed talks about rate hikes.

Italy defends bank rescue plan: As investors mark their disappointment by selling off bank stocks, with even Intesa SanPaolo, Unicredit and Ubi Banca, closing down between 4 and 5% Tuesday. There concerns that the plan, which is based on a EUR 5 bln bad bank fund, is not ambitious enough to clear up Italy’s financial system and help mitigate losses from the large number of non performing loans in Italy’s banks. Bank of Italy’s Rossi said in an interview with La Repubblica that the new fund aims to resolve banking sector problems and Padoan told Sole that the ECB views the fund favourably.

 

Main Macro Events Today

•   US Retail Sales  March retail sales are expected to show a flat headline (median 0.1%) with a 0.3% (median 0.4%) ex-autos increase when the data is released on Wednesday. Retail sales declined in both January and February with the January headline down 0.4% and February down 0.1%. We expect some downside risk to the release from depressed chain store sales and vehicle sales declines.

• US (PPI) March PPI is out later today and should post a 0.2% (median 0.3%) increase with the core up 0.1% (median 0.1%). This follows a -0.2% headline and unchanged core rate in February. Oil prices have begun to rebound and this showed up in today’s March trade price index where import prices managed to improve 0.2% after a long run of declines.

Janne Muta

Chief Market Analyst

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Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in FX and CFDs products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.

FX News Today

European Outlook: Asian stock markets outside of China are mostly higher, led by a rebound in Japan, where markets benefited from a weaker Yen and the BoJ’s decision to tweak the calculation for negative rates, which underpinned bank stocks amid hopes that the negative rate portion of bank reserves will be lower than feared. Oil prices are off earlier highs, but the front end WTI future is holding above USD 40 per barrel. US stock futures are also moving higher, but UK futures are down, with the U.K. continuing to underperforming amid Brexit fears. Released overnight. BRC retail sales came in much weaker than expected and unexpectedly contracted, which will add to pressure on the FTSE 100 ahead of the release of March inflation data today.

Tensions between ECB and Germany intensify: Finance Minister Schaeuble’s unusually clear comments on ECB policy saying that “there is a growing understanding that excessive liquidity has become more a cause than a solution to the problem” a reflection of a growing agreement among German policy makers that it is time to publicly distance themselves from Draghi’s negative interest rates policy. With the right wing AFD, which originally was founded on an anti-EMU platform gaining more and more support and German savers enraged by dwindling returns on private retirement funds, they were lured into by a public campaign trying to reduce pressure on the PAYG pension system, Merkel is under pressure to at least be seen as trying to reign in Draghi’s spending spree. Not that Germany questions the ECB’s independence, rather as with the OMT program, there are increasing doubts that the ECB is acting within its mandate. Even if a court dispute between German and the ECB is highly unlikely with the ECB heavily relying on investor trust in Germany as the stability anchor of the Eurozone, an open conflict between the central bank and the Eurozone’s largest economy could easily rekindle the debt crisis once again.

Kaplan Speech: He remains skeptical about negative rates, which can hurt banking, money and commercial paper markets, and he hopes the U.S. will avoid that trap. He said the “living will” process necessary if onerous and challenging to big banks. He expects global energy supply to exceed demand through the end of this year, leading to more volatility in the oil-gas industry, including bankruptcies and more restructuring until H1 2017. (He is the president of the Dallas Fed and should know better than most). However, he does expect the headwinds from the strong dollar to fade. Kaplan does not expect planned rate hikes to shift the Treasury yield curve significantly, nor lead to Fed portfolio losses.

The Debate on NIRP heats up: The ongoing controversy over Negative Interest Rate Policy (NIRP) continued in several articles circulating, with IMF’s Largarde defending the utility of negative rates in a blog post that suggested that lending and risk taking will increase. But Bill Gross of Janus said in a Barron’s article that savers would move into cash and could in fact hoard savings to compensate for the lack of returns from pension and insurance funds, and that could result in their ultimate demise. Larry Fink of Blackrock agreed in the FT that in the case of negative rates savers will divert funds into more savings, rather than less. The WSJ also pointed out the underperformance of banks in this environment heading into peak earnings season for banks.

 

Main Macro Events Today

• UK Consumer Price Index  Headline CPI is expected to tick higher, to +0.4% (median same) from 0.3% in the month previous. The core CPI reading is also seen nudging up, to +1.4% y/y from 1.3%. PPI is expected.

• US Import and Export Prices March trade price data should show import prices up 1.6% with export prices down 0.2%. This follows February figures which had import prices down 0.3% and export prices down 0.4%. WTI prices improved in March which should help prop up import prices after a steady string of declines. Despite the increase, oil prices still remain at depressed levels so they could pose some continued downside risk.

Janne Muta

Chief Market Analyst

If you wish to get the latest forex brokers news,you can visit our Top Forex Brokers official website:

http://www.topforexbrokerscomparison.com

Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in FX and CFDs products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.