Stock markets in Europe and the US finished on a positive note last week as hopes of assistance from the European Central Bank, and high expectations about US-China trade talks helped lift investment.
The German IFO business climate report fell to 98.5, while economists were expecting a reading of 99. It was the latest disappointing economic announcement from the largest economy in Europe. Some traders see bad news as good news, in that, weakened economic data, might encourage the ECB to alter its policy. On Friday, eurozone inflation fell in January to 1.4% from 1.6%. The decline wasn’t much of a surprise given the fall in energy prices in recent months. The CPI rate that excludes food and energy edged up to 1.2% from 1.1%, and that’s encouraging to see as it shows that demand is firm.
Negotiations between the US and China are heading in the right direction. President Trump announced overnight that the early March deadline for the implementation of higher tariffs on Chinese imports will be delayed. Stocks in Asian pushed higher on the back of this, in particular, the Shanghai market. It was reported that ‘substantial progress’ has been made between the two sides, and that fuelled the rally.
The US dollar is still firm, largely on account of the weakness of other currencies. At the back end of last week we heard from a number of Federal Reserve members. John Williams, the New York Fed chief, expressed concerns about the low inflation rate, and its inability to hit their 2% target. The policymaker also said it is likely to be an issue for other central banks too.
Gold gave up some ground on Friday, but the metal is still in the same upward trend that it has been in since mid-November. Palladium reached another record high last week, and there are concerns about supply levels, so demand is likely to remain high. Oil prices performed well last week and the feelgood factor in relation to US-China trade talks is helping the upward move.
EUR/USD – has been broadly pushing lower since early January, and if the negative move continues it might retest the 1.1216 area. Resistance might be found at 1.1400 or 1.1500.
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 1.3200 area. The 1.2775 area region might act as support.
EUR/GBP – while its holds below the 200-day moving average at 0.8862, its outlook is likely to be negative. 0.8620 might act as support. A rally might encounter resistance at 0.9000.
USD/JPY – has been on the rise since early January, and if the bullish move continues it might target the 112.00 area. A break below 109.50, might bring 108.50 into play.