The European session was largely positive with the FTSE 100 reaching its highest level during this trading week, but the DAX and the CAC 40 finished fractionally higher and marginally lower respectively.
Sentiment was largely positive after reports that the trade negotiations between the US and China were improving. It was reported that Beijing made ‘unprecedented’ proposals to the US in relation to forced technology transfers, and that it is a major step forward, as the trade talks were never just about China buying more US goods.
US markets eked out small gains as the optimism surrounding trade talks was balanced out by the growth figures. The final fourth-quarter US GDP report came in at 2.2%, while the previous reading was 2.6%, and economists were expecting 2.4%. The slowdown in growth of the US economy towards the back end of last year adds weight to the Fed’s argument that rates should be kept on hold for the foreseeable future. The timing of the growth report isn’t great as investors have been fretting about the prospect of a recession on account of the inverted yield curve.
Equity markets in Asia rallied on the back of US-China trade talks, and the markets in mainland China were the biggest gainers.
US pending sales dropped by 1%, and this is the latest underwhelming update from the US housing sector. On Tuesday, the Case Schiller report highlighted a drop in house price growth.
Westminster will remain in focus as there is talk that MPs will be asked to vote on the withdrawal agreement, but not the ‘political declaration’. Should the vote take place, it only stands a slim chance of being passed as the DUP are staunchly opposed to prospect of Northern Ireland being treated differently to Great Britain post Brexit, and if the DUP vote it down, the anti-EU ERG are likely to follow suit.
Palladium suffered another sever sell-off yesterday as fears of a bubble persist. Gold and silver lost ground too as the move higher in the US dollar put pressure on the metals.
German CPI dropped to 1.5% from 1.7%, and economist were expecting 1.6%. The update is worrying as Germany is the powerhouse of Europe, and the latest manufacturing figures were dreadful, and we are seeing weakened demand. ECB policymakers have already suggested the policy loose, and in light of the data, might remain loose for a long time. German import prices and retail sales will be released at 7am (UK time) and the consensus estimate is 0.5% and -0.9% respectively. The announcement will be closely watched given the poor economic updates from Germany lately.
French CPI will be announced at 7.45am (UK time) and dealers are expecting 1.4%, and that would be a decline on the 1.6% reading in February. The final reading of fourth-quarter Spanish GDP will be released at 8am (UK time), and the consensus estimate is for the reading to remain unchanged at 2.4%.
At 9.30am (UK time) the final fourth-quarter UK GDP reading will be announced on a quarterly basis. The reading is expected to be 0.2%, and the yearly reading is tipped to be 1.3%. Italian CPI will be announced at 10am (UK time) with estimates for 1%, which would be a dip from the 1.1% in February.
The US core PCE report will be published at 12:30pm (UK time) and traders are expecting the report to remain unchanged at 1.9%. On a monthly basis, personal income and personal spending are both tipped to increase by 0.3%. Canadian monthly GDP will be released at 12.30pm (UK time) and dealers are expecting a reading of 0.1%.
The University of Michigan consumer sentiment report is revealed at 2pm (UK time), and traders are expecting the reading to hold steady at 97.8. The new home sales report will be released at the same time, and economists are expecting 620,000, and which would be an improvement on January’s 607,000.
EUR/USD – has been broadly pushing lower since early January, and if the negative move continues it might retest the 1.1176 area. Resistance might be found at 1.1448.
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 1.3380 area. The 1.2775 area region might act as support.
EUR/GBP – while its holds below the 200-day moving average at 0.8840, its outlook is likely to be negative. 0.8471 might act as support. A rally might encounter resistance at 0.8800.
USD/JPY – has been edging lower since the start of the month and a break below 109.50 might bring 108.50 into play. If the wider rally continues, it might retest the 112.00 area.