While European markets slipped back sharply yesterday, US stocks managed to stabilise after their big falls on Tuesday. This stabilisation is likely to see a slightly more positive open for Europe today, although the catalysts that prompted Tuesday's slide remain a concern for investors.

Concerns remain about the ability of the new US administration to deliver on its promises on tax and banking reform, as well as infrastructure spending in the time expected given the current disagreements surrounding health care reform.

If Trump is unable to deliver on his health care promises, where the majority of Republicans are broadly in agreement it will inevitably beg the question as to how he can deliver on anything else, which means a defeat in today’s House vote could trigger further investor nervousness, about deliverables. 

This optimism about the so called reflation trade also helped drive the recent rebounds in commodity prices, however even here there is evidence of an accelerating unwind in some of the recent optimism, with oil prices remaining under pressure, while iron ore prices have also slid back sharply in recent days.

Another rise in US stockpiles has once again shone a light on the inability of the recent OPEC production cuts to make a dent in the current inventory overhang, as Brent prices briefly dropped below the $50 level for the first time since this year hitting a 4 month low in the process before rebounding.

Investors will also be paying particular attention to a succession of Fed speakers today with remarks from Fed chief Janet Yellen likely to come under scrutiny, along with FOMC dissenter, Minneapolis Fed President Neal Kashkari as well as Dallas Fed Robert Kaplan.  

Yesterday’s terror attack on the UK parliament at Westminster saw little impact on stocks markets or the pound which after a brief dip managed to hold on to its recent gains against the US dollar, while gold prices continued their recent resilience near to its highest levels this month.

The latest UK retail sales numbers from the CBI for March are also likely to be closely watched for any additional evidence that the recent rise in prices is starting to further erode consumer spending habits as the deadline for Article 50 looms. These are expected to show a decline to 4 from 9 in February.

EURUSD – currently capped just below resistance around the 1.0830/40 area, with the 200 day MA also coming into view at 1.0945 on a break of 1.0850. Pullbacks need to hold above 1.0680 for a test of the 200 day MA to pan out.  

GBPUSD – despite the negativity the pound feels like it could break higher. A break through the 1.2500 could well retest the February highs above 1.2700. Support comes in at the 1.2380 area. 

EURGBP – while below trend line resistance above the 0.8720 area we could well head back to the 0.8580 area. Above 0.8730 we could head back towards the highs at the 0.8800 area. 

USDJPY – have fallen below the 111.50 area finding support at the 110.70 area. Rebounds could well extend towards the 112.50 area but the bias has shifted towards the 110.20 area and potentially 108.50. 

 

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