ECB

Market Review 05-03

Market Review 05-03

Forex News

Dollar stays near two-week high as euro flags ahead of ECB meeting

From: Reuters.com

The dollar stood close to a two-week high against key peers on Tuesday, shored up by a resilient U.S. economy and a flagging euro ahead of a European Central Bank policy meeting.

Higher U.S. bond yields kept the dollar well bid, and though rates were off overnight peaks, traders bet the greenback had more going for it than some of its peers.

The euro remained wobbly before the ECB meeting on Thursday. The ECB is facing growing pressure to address how to protect the euro zone economy from a protracted slowdown.

In contrast, the dollar has enjoyed some support from higher U.S. Treasury yields as recent data, including U.S. fourth quarter gross domestic product, has eased fears of a potentially rapid loss in economic momentum.

The dollar index versus a group of six major currencies was 0.05 percent higher at 96.726 after going as high as 96.816 the previous day, its strongest since Feb. 19.

Although benchmark U.S. Treasury yields pulled back from peaks seen in late January, underlying demand for the dollar remained solid in a sign of confidence over the economic outlook.

The euro dipped 0.1 percent to $1.1326 . It had brushed an 11-day low of $1.1309 on Monday.

“The ECB meeting is unlikely to provide big surprises, but the euro is getting top heavy as the central bank, after all, is expected to strike a dovish tone,” said Shin Kadota, senior strategist at Barclays.

The dollar rose 0.15 percent to 111.92 yen, bouncing back from losses suffered the previous day.

Against a broadly firmer greenback, the Australian dollar was down 0.2 percent at $0.7077, cancelling out modest gains made overnight on expectations for further easing of trade tensions between the United States and China.

The Australian dollar sagged after Tuesday’s Caixin/Markit China purchasing managers’ index (PMI) showed the services sector in the world’s second largest economy easing to a four-month low. The currency is sensitive to developments in China, Australia’s main trading partner.

The Aussie briefly ticked up after the Reserve Bank of Australia left interest rates unchanged at 1.5 percent as widely expected on Tuesday.

“The currency got some lift as the RBA refrained from taking an even more dovish stance. The focal point, however, is still on potential easing by the RBA and the Australian dollar remains on the defensive,” said Masafumi Yamamoto, chief forex strategist at Mizuho Securities in Tokyo.

The Australian dollar took a big hit last month after the RBA stepped back from its long-standing tightening bias, saying the next move in rates could just as well be down as up.

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GBP/AUD clings to 1.8600 after RBA, all eyes on UK Sevices PMI, Carney’s Testimony

From: FXstreet.com

  • GBP/AUD trades little changed around 1.8600 during early Tuesday
  • The pair witnessed pullback after RBA but is awaiting the British catalyst for further direction
  • While 1.8570-65 can confine near-term declines, 1.8720 is a strong upside resistance to watch

GBP/AUD trades near 1.8600 during early Tuesday. The pair recently bounced off 1.8570 after the Reserve Bank of Australia (RBA) cited trade tensions and household spending a major uncertainty while keeping the cash rate unchanged at 1.5%. Investors now await monthly readings of the UK Services PMI followed by testimony by the Bank of England (BoE) Governor Mark Carney.

The RBA met wide consensus of leaving benchmark cash rate untouched during today’s monetary policy meeting. The Australian central bank further went on praising the low rates as a support to the economy where unemployment and inflation could improve gradually. However, uncertainty surrounding household spending and trade talks between the US and China were marked in red.

After the meeting, the Australian Dollar (AUD) declined against the British Pound (GBP). Though, monthly reading of the UK Services PMI and testimony by the BoE’s Carney are likely immediate catalysts for the pair traders to watch from now.

The February month Services PMI could disappoint Pound buyers if matching market consensus of 49.9 against 50.1 prior. BoE Governor Carney is to testify on Brexit, inflation, and the economy before the House of Lords Economic Affairs Committee where he might shed some light over Brexit uncertainty being a hurdle for the BoE’s monetary policy. The Governor may also discuss recent weakness in domestic data but might not risk conveying an extensive policy change.

For the Aussie traders, early Wednesday’s release of Q4 2018 GDP release will be crucial to watch. The growth figure is likely to increase by 0.4% from 0.3% rise during Q3.

GBP/AUD Technical Analysis

On the break of 1.8570-65 immediate support, the GBP/AUD pair might drop to 1.8500 while an upward sloping trend-line at 1.8390 could limit the quote’s further declines.

Alternatively, 1.8720-25 is likely nearby resistance for the pair, a break of which can propel it further towards 1.8850 and 1.8900 numbers to the north.

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Stock Market News

Musk says $35,000 Model 3 to reach volume production mid-year

From: Reuters.com

Tesla Inc Chief Executive Officer Elon Musk said on Monday production of the $35,000 version of the electric carmaker’s Model 3 will start this month, but would not reach “volume production” until mid-year.

“Gap in understanding is that $35k Model 3 production *starts* this month, but will not reach volume production until mid year. Extremely difficult to predict middle part of manufacturing S-curve,” Musk said in response to a tweet.

It was not immediately clear what Musk meant by “volume production”. Tesla did not respond to a request for comment.

The launch of the $35,000 version, Tesla’s cheapest model, last week comes at a crucial time for the company as some analysts had raised concerns that demand for the higher-priced versions of the Model 3 was beginning to dry up in the United States, especially after a federal tax credit was cut in half this year.

Tesla also said last week its global sales would now be online-only, in a bid to cut overhead costs.

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S&P 500 Shaken to Start the Week, A Run of Rate Decisions Begins

From: DailyFX.com

  • The Dow called an end to a 9-week advance – longest since May 1995 – last week, and Monday opened with a notable stumble
  • Momentum behind headlines of US-China trade negotiations doesn’t seem to be earning a steady build up of market optimism
  • Global PMIs (GDP proxy) start to hit the wires today, the RBA will touch off rate decisions and heavy event risk ratchets anticipation

RISK TRENDS OFF TO A PAINFUL START DESPITE THE AIR OF THREATS LIFTING

Sentiment seemed to slow and stall this past week following two months of persistent and productive rebound that erased much of the losses suffered through the fourth quarter of 2018 – at least that is for US indices. The S&P 500 and Dow carved aggressive rising wedges that earned the latter a remarkable 9 consecutive week advance, the longest such climb since May 1995. That tally was broken this past week in a rather lackluster slip that was borne of the congestion that aligns to the previous ‘shoulder’ of large head-and-shoulders patterns. That uncertainty was showed some serious signs of doubts to start this trading week. The selling pressure through Monday’s session was heavy. And, even though there was a bounce through the second half of the day, the reminder that a complacent bid is not a certainty seems to have shaken the speculative rank.

Throughout the young recovery in 2019, there question of ‘what is inspiring bulls’ has dogged those willing to consider the question seriously. Growth forecasts have dropped, warnings over financial conditions and preparations have arisen through numerous channels, and a complex of direct fundamental risks have expanded over the past year. Nevertheless, an underlying sense of complacency has encouraged opportunists to seek out favorable headlines. One such point of speculation was the eventual end of the US-China trade war. That favorable turn of events is already underway with President Trump’s declaration over a week ago that he would postpone the tariff escalation deadline.

As of the start of this week, sources have leaked expectations that China is willing to move on structural issues the US has been troubled by like intellectual property sharing. And yet, the markets are not finding any renewed sense of enthusiasm. Averting a crisis is not the same thing as fostering an environment of new opportunity. If the ‘relief rally’ mentality is fading away, we are left with far less favorable conditions like slowing growth measures which will be hit upon by monthly PMIs due today or monetary policy as an impediment which will intensify notably starting Tuesday. What I look for in market activity to inform a sense of market sentiment is correlation across assets that are otherwise independent. Those measures that I follow more regularly were all under pressure Monday.

AUSTRALIAN DOLLAR STARTS ON LONG RUN OF DATA, POUND SIMPLY CAN SHAKE BREXIT DISTRACTION

For scheduled event risk over the next 24 hours, there are a few currencies with a few noteworthy highlights. One of the top listings and a run of data throughout the week goes to the Australian Dollar. The currency has already absorbed a disappointing 4Q corporate profit release along with inflation expectations and building permits. The combination did little to truly motivate the currency however, likely because attention is being centered upon what is ahead. Due today is the Reserve Bank of Australia’s (RBA) rate decision. This central bank is considered the most likely to realize a rate cut in 2019 according to overnight swaps. That inherently leverages speculation around the authority’s intended course. What’s more, the interest in AUD doesn’t stop after the policy update as we are expecting 4Q GDP numbers the day after. There are further events including remarks from Governor Lowe and a distinct connection to China which is due for serious fundamentals waves this week. As over-loaded as the currency is this week, that is likely to do more to destabilize and sideline a trend from the Aussie Dollar than it is to facilitate a meaningful trend.

Another currency dealing with multiple lines of fundamental influence over the next 24 hours is the British Pound. This past session offered up a construction activity (PMI) report that unexpectedly flipped into contractionary territory (anything below 50) with a 49.5 for February. Ahead, the ‘composite’ and service sector PMIs are due alongside the Financial Policy Committee’s minutes, yet these indicators are unlikely to draw attention away from the open-ended threat of Brexit. Prime Minister May’s next opportunity to gain support for her proposal is a weak away, and Parliament seems to be set on course to render the same verdict – which would necessitate a vote two days later on whether to request an extension from the European Union. Last week’s breakout attempt by the Sterling looks just as difficult to achieve now as it did during the attempt. The question is whether that seeds the opportunity for reversal.

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Cryptocurrency News

Crypto Markets See Major Losses, While Stocks Rise as US-China Talks Expected to End

From: Cointelegraph.com

Crypto markets have slid today, with Bitcoin (BTC) having failed to hold the $3,800 price point. All of the top 20 coins by market cap are seeing major losses, according to CoinMarketCap.

Bitcoin is trading at $3,760 at press time, down around 2.4 percent over the past 24 hours. After Bitcoin saw relative stability around $3,850 starting from Feb. 25, the major cryptocurrency had dipped to as low as $3,733 earlier today. Bitcoin is down 2.7 percent over the past 7 days.

While all major markets are seeing red, Bitcoin is seeing a slight increase in terms of dominance on the market. Bitcoin’s market cap has grown around 0.4 percent today, according to CoinMarketCap.

Ethereum (ETH), the second-ranked cryptocurrency by market cap, is down 4.6 percent over the day, trading at around $127.14. The top altcoin is seeing a massive decline over the past 7 days, down around 9 percent.

Ripple (XRP), the third-top cryptocurrency by market cap, is trading at $0.305, down 2.7 percent over the past 24 hours at press time. Over the past 7 days, Ripple is down about 3 percent.

EOS (EOS), ranked fourth, is seeing the biggest losses among the top 20 coins. The altcoin is down 8 percent over the day, while losses over the week account for around 9 percent.

Litecoin (LTC) and Binance Coin (BNB) are the only two coins that hold weekly gains at press time. BNB is up around 13 percent over the past 7 days, while Litecoin holds around 1.4 percent gains on the week.

Total market capitalization dropped to $125 billion today after hovering around $130 billion earlier on the week. Daily trade volume is around $27 billion at press time.

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