There was a lot of news yesterday but there wasn’t much movement in the markets.
The European Central Bank (ECB) kept interest rates on hold – as expected, and the update from the bank’s head, Mario Draghi, was on the dovish side. Mr Draghi warned about risks to the downside and added that ‘significant stimulus’ was required to sustain inflation.
Earlier in the session Germany and France posted mixed manufacturing and services figures. The eurozone has been producing underwhelming data for months now, and so the cautious commentary from Mr Draghi wasn’t a surprise. The euro sold-off in the wake of the Draghi update, but the single currency managed to pullback a lot of the lost ground.
Wilbur Ross, the US secretary of commerce stole some of Mario Draghi’s thunder as he announced the US and China were ‘miles and miles’ away from ending the trade dispute, but in the same update Mr Ross said there is fair chance that China will get a trade deal. Larry Kudlow, an economic adviser to the Trump administration said the US president is optimistic on trade talks. Equity markets in Europe and the US have enjoyed a decent bounce back since late December, but the lack of progress over the US-China trade situation is curtailing further gains.
The Asian trading session had a positive run even though no deal has been made in relation to the US-China trade situation.
WTI finished higher yesterday and Brent Crude was largely unchanged as a surge in US oil and gasoline inventories was counteracted by fears the US will impose oil sanctions on Venezuela. The Energy Information Administration report showed that US oil stockpiles grew by nearly 8 million barrels, and gasoline inventories jumped by over 4 million barrels – a record high. There is speculation the Trump administration will punish Venezuela with oil sanction as a way of cutting off their revenue, even though nothing has been confirmed, the fear persists.
Sterling rallied overnight on a report the DUP, who are propping up Theresa May, have privately given support to her Plan B withdrawal agreement provided it contains a timeframe for the Irish backstop. The Prime Minister will need to win over members of her own party, and the EU, if she wants her solution to get approval.
Gold had a lacklustre session like most markets. The metal has cooled a little this week, but it remains firmly in its wider upward trend. The more measured updates from the Federal Reserve have halted golds upward move.
At 9am (UK time), the German IFO business sentiment index will be released and the consensus estimate is 100.7.
The UK CBI realised sales report will be announced at 11am (UK time), and economists are expecting a reading of 2.
EUR/USD – despite the recent pullback, it has been broadly been pushing higher since mid-November, and it might retest the 1.1570 area. Trend line support from the November lows might come into play at the 1.1330 region.
GBP/USD – has been pushing higher for over one month, and if it holds above 1.3000, it might bring 1.3174 into play. Support might be found in the 1.2815 region.
EUR/GBP – has been pushing lower since the start of the month, and support might come into play at 0.8620. The 200-day moving average at 0.8864 might act as resistance.
USD/JPY – if it manages to hold above the 109.20 area, it might target 110.00 or 111.20 – 200-day moving average. 108.00 might provide support.