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China trade data triggers declines, US jobs data in focus

European Stock markets finished lower yesterday after a volatile session. 

The European Central Bank (ECB) revealed plans to kick-off a new targeted liquidity scheme, but it won’t begin until September. The current targeted lending scheme will run until June, and there are more lined up.

Mario Draghi, the head of the ECB, reduced the GDP forecast for the eurozone for 2019 and 2020. The inflation outlook for next year was lowered too. The central banker altered the interest rate forecast, and he now predicts that interest rates will remain unchanged throughout 2019. The news of the extra targeted lending scheme briefly pushed the DAX, CAC 40 and the IBEX 35 into positive territory, but the gloomy outlook weighed on sentiment. Keep in mind, the OECD lowered its outlook for global growth for 2019 and 2020 on Wednesday.

The ECB’s update hurt the euro, and it fell to its lowest level against the US dollar since June 2017. The US dollar was driven higher by the selling pressure on the euro, and the US dollar index hit its highest level since mid-December 2018. The Japanese yen rallied too as traders sought out safe-haven currencies. The worries about the global economy and the firmer US dollar put pressure on copper, palladium and platinum.

US markets lost ground yesterday as investors are worried about the health of the global economy. Oil lost ground overnight due to worries about demand.

Overnight, China released the latest trade data. US dollar denominated exports fell by 20.7%, and economists were expecting a decline of 4.8%, and that compared with the 9.1% rise in January. The US dollar denominated imports component fell by 5.2%, and the consensus estimate was for -1.4%, and the previous reading was a decline of 1.5%. China celebrated the Lunar New Year last month so the numbers might not be an accurate reflection of trade.  Equities in Shanghai and Hong Kong are much lower on the back of the trade data.  

German industrial order will be announced at 7am (UK time) and on a month-on-month basis the reading is expected to be 0.5%. French industrial production will be released at 7.45am (UK time) and economists are expecting 0.1% growth on a monthly basis, and that compares with the 0.8% growth registered in December. Italian Industrial output will be released at 9am (UK time) and the consensus estimate is 0.1% on a monthly basis, which would be an improvement from -0.8% in December.

US non-farm payrolls will be released at 1.30pm (UK time), and the consensus estimate is for 180,000 jobs to have been added in February, and keep it mind the January report was 304,000. The unemployment rate is expected to edge lower to 3.9% from 4%. Average earnings on a yearly basis are expected to improve to 3.3% from 3.2%, and on a monthly basis, the reading is tipped to be 0.3%, up from 0.1%. The earnings component of the update is carefully watched as US workers who earn more, are likely to spend more. The jobs data has been erratic recently on account of the US government shutdown. It is worth noting, the latest ADP employment report showed that the January reading was revised higher to 300,000 from 213,000.

There will also be some hosing data released from the US at 1.30pm (UK time). Housing starts and building permits are expected to be 1.19 million and 1.28 million respectively. Canada will release its jobs data at 1.30pm (UK time) too. The unemployment rate is expected to hold steady at 5.8%, and the employment change is tipped to be flat.   

EUR/USD – has been broadly pushing lower since early January, and if the negative move continues it might retest the 1.1110 area. Resistance might be found at 1.1400.   

GBP/USD – has been driving higher since early December, and if it holds above the 200-day moving average at 1.3000, it might retest the 1.3472 area. The 1.2775 area region might act as support.

EUR/GBP – while its holds below the 200-day moving average at 0.8854, its outlook is likely to be negative. 0.8500 might act as support. A rally might encounter resistance at 0.8700. 

USD/JPY – has been on the rise since early January, and if the bullish move continues it might target the 113 70 area. A break below 109.55, might bring 108.50 into play. 


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