It’s been another record-breaking week for stock markets this past few days, with new record highs for the S&P 500, DAX, Stoxx 600 and the FTSE 250, as optimism over an economic reopening, along with a benign Federal Reserve contrived to keep a lid on bond yields, and assuage concerns that the central bank might act in haste when it comes to reining back on stimulus.
Yesterday’s surprise rise in weekly jobless claims only served to reinforce this message, that any recovery was likely to be lumpy in terms of the data, and that while some form of tapering might start to get discussed in the coming months, the prospect still seems some way off. The continued weakness in the US dollar only served to reinforce this goldilocks backdrop, though that might well change if we get particularly strong retail sales and CPI data next week.
European markets look set to open in positive territory this morning, as they look to continue where they left off yesterday after US markets finished higher with another record close for the S&P500, as it got to within a whisker of 4,100, led predominantly by the tech sector. Asia markets ended the week on a more mixed note with the latest China inflation data pointing to a decent rebound in March. Factory gate prices in particular were strong rising 4.4% on an annualised basis, compared to 1.7% in February, as economic activity picked up at the end of Q1. As a forward indicator this could well be an arbiter of rising prices rippling out into the global economy as we head into Q2.
The pound has continued to have a rotten week sliding back for the third day in a row, with some putting the declines down to the concerns over the AstraZeneca jab slowing down the vaccine rollout. While this may suit the narrative it's probably wide of the mark and more to do with the fact that bets on the pound have gone a little bit too one way. The fact remains that whatever problems the UK is having, the current problems appear perfectly navigable, with the rollout of the first instances of the Moderna jab yesterday. On Wednesday 506,630 doses were administered, most of which were second doses, with more than 31.8m people receiving a first dose, putting the UK well ahead of schedule on its vaccine rollout programme.
On the data front it’s a fairly quiet end to the week, with the latest industrial production numbers for February from Germany and France, both of which are expected to post some decent numbers on a month-to-month basis. This sector has managed to hold up despite the various restrictions that have been in place for months now. We also have the latest US PPI numbers for March, which can in some cases be a leading indicator for inflationary pressures in the supply chains of US businesses. Given the problems with shortages and problems at ports around the world it wouldn’t be a surprise to see a big jump here, with expectations of a rise from 2.2% to 2.7% on an annualised basis. The Canada jobs report is expected to see 100,000 jobs added in March on top of the 259,000 in February.
EUR/USD – another attempt to move higher has seen the euro move back above the 200-day MA, with a move through the 1.1930 level potentially opening up a move towards 1.2000. If we hold below 1.1930, we run the risk of a move back lower.
GBP/USD – has continued to struggle above support at the 1.3710 area, with a break below targeting a move back to 1.3670. A move through 1.3650 opens up the 1.3550 area. A move through 1.3920 retargets 1.4020.
EUR/GBP – three successive daily gains have seen the euro move through the 0.8620 area and the 50-day MA, potentially targeting the 0.8730 area. The 0.8620 area now becomes support, with a move below 0.8600 retargeting the 0.8540 area.
USD/JPY – has continued to slip back with the 108.70 area now the next key support. Resistance now sits back up near the 109.80 area. Below 108.70 retargets the 108.20 area.