Stock markets in Europe and the US had a good day yesterday as the recent fears about a recession in the US economy faded. 

A move higher in the US 10-year government bond yield removed some of the fear in the markets about a possible US recession. Olli Rehn, of the European Central Bank (ECB), said that monetary policy is likely to remain unchanged for ‘quite some time’. The euro-area has been in focus recently in light of the gloomy manufacturing figures from France and Germany at the end of last week. An unchanged policy from the ECB might counteract the poor economic sate of the currency bloc’s economy.

The Democratic Unionist Party said they would rather a long delay to Brexit rather than vote for Theresa May’s withdrawal agreement. The Northern Irish party are holding a firm line as they want to ensure that Northern Ireland is treated exactly the same as Great Britain after the UK’s exit from the EU, and that could mean the process being dragged out. Sterling reacted well to the news as anything that pushed back the exit date has a track record of giving the currency a boost.

Brexit will remain in focus today as ‘indicative’ voting will take place at Westminster later today. The voting should outline what MPs want from Brexit, but the votes are not legally binding, and it will be used as a political exercise to map out what lawmakers want.

The talk of a recession in the US economy on the back of the inverted yield curve came at a time of some softening economic indicators from the US. Yesterday, the latest Case Schiller house price index report showed annual growth of 3.6%, which was a big drop off from the 4.3% growth in the previous report. The building permits and the housing starts came in at 1.29 million and 1.16 million respectively, and both showed declines on the month. The Conference Board consumer confidence reading slipped to 124.1 from 132.1.

Stocks in Asia were subdued overnight as investors remain cautious about the health of the world economy.

Mario Draghi, the head of the ECB will be speaking at 8am (UK time) and his update will be in closely watched in light of the comments from Olli Rehn yesterday.

At 11am (UK time) the UK CBI realised sales report will be released and economists are expecting a reading of 5, which would be an improvement from the 0 reading last month.

The US trade balance will be released at 12:30pm (UK time), and deficit is tipped to drop to $57. billion. The report will be of particular importance in light of the ongoing trade talks with China.

At 2.30pm (UK time) the latest Energy Information Administration US oil inventory report will be announced, and dealers are expecting a draw of 3.3 million barrels, while gasoline stockpiles are tipped to fall by 3 million barrels. Keep in mind the American Petroleum Institute oil inventory report last night showed that oil stockpiles climbed by 1.9 million barrels.  

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.

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