Market Review 10-04

Market Review 10-04

Forex News

EUR/USD waits for the ECB, FOMC around 1.1260


  • The pair alternates ups & downs near 1.1260.
  • The greenback gyrates around the 97.00 handle.
  • ECB meeting, FOMC minutes next of relevance today.

EUR/USD is now attempting some consolidation in the top of the weekly range near 1.1260 ahead of key events later today.

EUR/USD focused on ECB, FOMC

Tuesday’s up move to multi-day highs in the 1.1280 region lacked of follow through, receding to the 1.1260 region and sparking at the same time some consolidation among investors.

In the meantime, the cautious stance has resurfaced in the markets following President Trump’s threats of imposing further tariffs on EU products, including the key autos sector. Adding to the broad-based concerns over global growth, the IMF once again revised lower its outlook and now sees the world economy expanding at an annualized 3.3% this year, down from 3.5%.

Later in the day, the ECB meeting will be the salient event in Euroland, where expectations are tilted towards a somewhat dovish message from the central bank, while traders will look for extra details on the implementation of TLTROs and a probable tiered deposit rate system.

What to look for around EUR

EUR remains under pressure following poor fundamentals in Euroland and the strong up move in the greenback in past weeks. In fact, recent disappointing readings in the region somehow confirm that the slowdown in the bloc and the ‘patient-for-longer’ stance from the ECB could be among us for longer than expected. Against the backdrop of souring risk-appetite trend, the greenback should emerge stronger and is expected to keep weighing on spot for the time being. On the political front, headwinds are expected to emerge in light of the upcoming EU parliamentary elections, where the focus of attention will be on the potential increase of the populist option among voters.

EUR/USD levels to watch

At the moment, the pair is gaining 0.01% at 1.1262 and a breakout of 1.1284 (high Apr.9) would target 1.1318 (55-day SMA) en route to 1.1337 (200-week SMA). On the downside, immediate support emerges at 1.1230 (10-day SMA) seconded by 1.1183 (low Apr.2) and finally 1.1176 (low Mar.7).

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Dollar, Yen Little Changed; U.S.-EU Trade Tensions, Brexit in Focus


The U.S. dollar and the Japanese yen were little changed on Wednesday in Asia as traders remained cautious amid the Brexit uncertainty and trade tensions between the EU and the U.S.

The Japanese yen received some support earlier in the day, fuelled by escalating U.S.-EU trade tensions and the International Monetary Fund’s bearish update on global growth.

The safe-haven currency gave back some of its gain and was last traded at 111.14 against the dollar, down 0.03%.

Reports on Monday said the U.S. and EU could be set to impose tit-for-tat tariffs on each others’ products. The U.S. said it could be slapping tariffs on $11 billion worth of EU goods. In response, the EU said it stands ready to launch countermeasures.

The dispute over government subsidies given to Boeing (NYSE:BA) and European rival Airbus had been tied up in ligation since 2004, but the World Trade Organization in May last year ruled that European subsidies to Airbus were illegal.

Meanwhile, the U.S. dollar index that tracks the greenback against a basket of other currencies was also largely unchanged at 96.637.

Investor sentiment was further dampened today after the IMF cut its 2019 U.S. growth outlook to 2.3% from 2.5% in January and cut its 2019 global growth outlook to 3.3%, the lowest level since the financial crisis.

Looking ahead, investors’ focus will be on a European Central Bank meeting and the release of minutes of the Federal Reserve’s last policy meeting.

On Tuesday, U.K. lawmakers voted ahead of a Brexit summit meeting later in the day to approve Prime Minister Theresa May’s plan to seek to delay Britain’s exit from the European Union to June 30.

The EUR/USD pair was unchanged at 1.1260, while the GBP/USD pair edged up 0.1% to 1.3069.

The AUD/USD pair and the NZD/USD pair were up 0.2% and 0.1% respectively.

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Stock Market News

Euro Shivers, Dax and S&P 500 Fall on IMF Outlook, Italy Growth


  • SPX and DAX fell on IMF and Italian econ growth outlooks
  • Italy budget deficit to widen – How will Brussels respond?
  • EU-US trade war to weigh on battered Eurozone economy

EURUSD, along with S&P500 and DAX futures began to fall following the IMF’s publication on the outlook for global growth being at its lowest point since the financial crisis. Risk aversion was further compounded by news that the Italian economy may only expand 0.1 percent (down from the 1.0 estimate) and the budget deficit forecast was widened to 2.5%, substantially larger than what Rome and Brussels had agreed upon.

As forecasted in late 2018 and at the start of the year, the respite offered to markets by the fragile agreement between Rome and Brussels was an ethereal pause. The recessionary pressure and revised GDP numbers next to a bigger-than expected budget deficit could just be enough to push Brussels to reopen the budget case. This comes as the US pivots away from a trade conflict with China and appears to be now entering a new trade spat with the EU, another weight the economy will have to lift.

Looking ahead – specifically tomorrow – there are a number of major event risks. The ECB will be releasing its rate hike decision followed by a press conference with Mario Draghi. The commentary will likely echo a similar tone struck at the last meeting, only this time the urgency may be greater, and the outlook less certain.

Another European-based risk is the EU’s verdict on whether to grant the UK an extension during the emergency summit in Brussels. Traders will also be eyeing the release of the FOMC meeting minutes, another major indicator to watch.

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For first time in a decade, U.S. companies could report lower profits on higher revenue


Wall Street is bracing for large U.S. companies to report a decline in quarterly profits even after raking in higher revenues, something that has not happened in more than a decade.

S&P 500 companies due to report in the coming weeks face tough comparisons with last year, when the U.S. tax code overhaul helped boost profits by more than 20%.

But with rising costs, some resulting from tariffs, analysts see profit margins shrinking by 1.1 percentage point, the first year-over-year decline in at least two years, IBES data from Refinitiv showed.

“Companies are experiencing rising input costs as well as increases in labor costs from modestly rising wages,” said Kristina Hooper, chief global market strategist at Invesco in New York.

First-quarter earnings for S&P 500 companies are expected to fall 2.5% from a year earlier, which would mark the first quarterly U.S. decline since 2016. Revenue is meanwhile seen up 4.8%.

Costs for certain raw materials like aluminum have increased as the United States slapped tariffs on imports from China and other countries.

First-quarter earnings could be crucial to the bull market’s continued success, with some investors seeing them as the catalyst to either lift stocks to all-time highs or pour cold water on the rally.

Stocks have bounced back from a late-2018 selloff on optimism that the United State could seal a trade deal with China and expectations the Federal Reserve would not raise interest rates again any time soon.

Delta Air Lines Inc is due to report on Wednesday, while JPMorgan Chase & Co and Wells Fargo & Co report on Friday. Results from Netflix Inc and some big industrial names like Honeywell International Inc are expected next week.

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Cryptocurrency News

Institutional Bitcoin Trading Volumes See Fourth Month of Growth, Diar Reports


Trading of institutional Bitcoin (BTC) investment products have seen growth for the fourth month running, and are rising against United States-based crypto exchanges as a percentage of total trading volume. The news was revealed in a new report from weekly crypto outlet Diar on April 8.

Diar’s data reveals that month-on-month, the percentage that institutional BTC products account for out of total Bitcoin trading volumes has continued to steadily grow, with 15% in January 2019, 17% in February, 18% in March and now 19% in April.

Diar’s data notably focuses on three institutional products — Chicago Mercantile Exchange (CME) Bitcoin futures, Chicago Board Options Exchange (CBOE) Bitcoin futures and Grayscale’s Bitcoin Investment Trust (GBTC).

The rising share notably does not represent an all time high, which was at 24% in July 2018, according to Diar’s data. Moreover, the rising relative popularity of institutional products comes amid a backdrop of declining Bitcoin trading volumes in the U.S. context overall.

As Diar notes, CBOE has logically seen the biggest decline in market dominance, having delisted Bitcoin futures in mid-March of this year as it reassesses its approach to listing crypto derivative offerings.

Diar further states that Grayscale’s GBTC, which trades on the OTCMarkets, has reportedly also lost dominance. Having accounted for over 50% of the market share across the three institutional products, it now reportedly stands at under half, at 24%.

As a context for its findings, Diar mentions a recent analysis from cryptocurrency index fund provider Bitwise Asset Management that argued that 95 percent of volume on unregulated exchanges appears to be fake or non-economic in nature.

While suspicions in regard to reported volumes have frequently beset the industry, Bitwise’s data and claims were notably submitted to the U.S. Securities and Exchange Commission.

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