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While travel and hotel stocks took a bit of a hit yesterday in the wake of the Brussels terror attacks equity markets in general were able to shrug off the worst of their intraday losses, with European markets managing to just about finish the day in positive territory.

Whether the European consumer will prove to be anywhere near as resilient remains to be seen, and that may not bode well for the economies of Europe in the coming months, which in yesterday’s economic data did appear to be showing some signs of a recovery in the latest services PMI data for March.

In France in particular the performance of the services sector which had taken a heavy knock in the aftermath of the horrific events in Paris, improved strongly as economic activity bounced back to 51.2 after a weak February. The most notable improvements were to business expectations which improved to a seven month high, as French business and the French economy looked to put the events of November 13th last year behind them.

The risk now is that yesterday’s horrific events in Brussels snuff out this returning optimism, indeed it would be surprising if it didn’t given that the initial response of consumers will be to modify their behaviour, whilst hotel and travel bookings are more than likely to see sharp falls, as consumers across Europe absorb the events of the past few days.

One of the consequences of yesterday’s events was a further slide in the pound which had already been under pressure due to political events over the weekend. The assumption being taken by traders was that as far as the Brexit debate was concerned, events in Brussels yesterday could well make the arguments for staying in the EU much harder to justify by the “remain” campaign.

The “Remain” camp have made a key plank to their argument for staying in the EU that Britain is stronger and safer from terrorist threats, a claim that is bound to raise a few questions with a lot of people watching the horror of yesterday unfold on their TV screens.

The US dollar on the other hand managed to post its third successive daily gain in a row after last week’s surprisingly dovish Fed meeting. It would appear that while the Federal Reserve has dialled back its expectations for interest rate rises this year, there are a number of policymakers who remain bullish on the US economy with Charles Evans of the Chicago Fed following on from Lockhart and Williams on Monday, in saying he still expected to see at least two rate hikes this year, though unlike the other two he stopped short of suggesting that April was a possibility. Given that Mr Evans tends to lean more to the dovish side these comments were somewhat of a surprise.

In spite of these comments the prospect of a rate rise in April still remains very much an outlier, and unlikely, with the market assigning a 10% probability of such an outcome. The Fed would run the risk of looking foolish doing such a rapid about turn given last week’s dovish assessment of the outlook internationally.

EURUSD – having failed to break through the February highs at 1.1380, the euro slipped back yesterday with support coming in at the 1.1180 area. The 200 day MA at 1.1050 remains a key support with only a move below 1.1030 arguing for a move towards 1.0800.

GBPUSD – we saw a sharp slide lower yesterday, taking us below the 1.4250 level, and which could well see further losses towards the 1.4140 level, trend line support from the recent lows at 1.3835. While above here the short term uptrend towards 1.4700 remains intact, however a move below 1.4080 suggests a revisit to the recent lows.

EURGBP – while below the 200 week MA at 0.7935 and the highs this year we remain vulnerable to a move back to the recent lows at 0.7680.  A weekly close above 0.7935 suggests a move towards 0.8100.

USDJPY – a marginal new low at 110.65 keeps the downside pressure intact with a view to a move towards the 106.00 area. This bias remains intact while resistance at 114.80 remains intact. Above 115.00 argues a short term base is in place.

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