Equity traders will be paying close attention to the European Central Bank (ECB) update today, as yesterday it was reported the central bank are looking into launching another round of targeted lending.
The report nudged stocks higher yesterday in the afternoon, but the major indices finished the day in the red.
The ECB will announce the latest interest rate decision at 12.45pm (UK time), and the consensus estimate is for rates to remain on hold. At 1.30pm (UK time), the ECB chief, Mario Draghi, will begin the press conference, and the latter is likely to be the highlight of the day.
Equity markets in Asia overnight traded lower as investors grew wrestles over the lack of new news in relation to the US-China trade talks.
US stock markets lost some ground last night. The latest trade figures from the US showed that the trade deficit actually increased to $59.8 billion, from the revised deficit of $50.3 billion in November. President Trump wants to reduce the trade deficit, and it is going in the opposite direction. Imports increased, so US demand is firm, but exports dropped, and that indicates that global demand is cooling.
The beige book stated the majority of the US endured ‘slow to moderate’ growth in late January and February. The government shutdown impacted the economy. There was ‘mixed’ consumer spending across several regions.
John C. Williams, the head of the New York Fed said that slower growth ‘ isn’t necessarily cause for alarm’, and it is likely to become the ‘new normal’. The central banker predicts that US GDP will slow to around 2%, and he feels the current interest rate is broadly in line with neutral rate – so he is unlikely to be pushing for a change to monetary policy anytime soon.
The oil market traded broadly lower yesterday, and the Energy Information Administration report injected volatility into the session. The announcement showed that oil stockpiles jumped by 7.06 million barrels, while gasoline inventories dropped by 4.22 million barrels.
The Bank of Canada (BoC) kept rates on hold yesterday meeting forecasts. The central bank warned that the slowdown in the global economy is more pronounced that initially thought, and that prompted a decline in the Canadian dollar.
The UK Halifax house price index will be announced at 8.30am (UK time), and on a monthly basis traders are expecting 0.1% growth, and they are expecting 1% growth for the three months until February on an annual basis.
Silvana Tenreyro, an external member of the Bank of England, will be speaking at 9.30am (UK time).
The revised eurozone GDP figures will be released at 10am (UK time), and the fourth-quarter growth figures are expected to remain at 0.2% on a quarter-on-quarter basis.
US initial jobless claims are due out at 1.30pm (UK time), and economists are expecting 225,000. Keep in the ADP employment report yesterday came in at 183,000, which slightly undershot the 189,000 forecast, and the January report was revised to 300,000, from 213,000. The huge revision marries up with the strong non-farm payrolls report that we saw in early February.
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 1.3472 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.