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Chinese concerns linger, eurozone data in focus

Stocks in Europe finished in the red yesterday as a little uncertainty in relation to US-China trade deal crept back into the markets. 

The announcement during the week that the US won’t be raising tariffs on Chinese goods in March was welcomed, but the old anxieties about when will the trade war be resolved crept back into trades’ minds.

Yesterday, US trade representative, Robert Lightizer, suggested that a trade agreement between the US and China wasn’t a done deal, and he added that a deal won’t be reached by China simply buying more US goods. Mr Lightizer also said that any deal must be enforceable.

Jerome Powell, the head of the Fed, was speaking in Capitol Hill yesterday. The central banker’s comments didn’t have a major impact on the markets. Mr Powell said the Fed is close to agreeing on a plan for the banks’ balance sheet. The policy maker expressed concern at the level of student debt, but said household debt is basically healthy. US stocks finished a little lower last night.

Overnight, China released the latest manufacturing and non-manufacturing reports. The manufacturing report was 49.2, and economists were expecting it to remain unchanged from the January report at 49.5. The manufacturing report was the weakest since early 2016. The non-manufacturing report was 54.3, and the consensus estimate was 54.5. Given that the Lunar New Year waa celebrated earlier this month, the report might not have been the best reflection of the Chinese economy. Equity markets are mixed in Asia.

The oil market rallied in the wake of the Energy Information Administration report, which showed that oil stockpiles fell by 8.6 million barrels, and the consensus estimate was for an increase of 2.84 million barrels. US oil stockpiles had risen the previous five weeks.

Sterling soared as there is a growing belief that Brexit will be delayed, adding to that, it was reported that the pro-Brexit, European Research Group, are softening their position in relation to Theresa May’s withdrawal agreement. The sense of optimism pushed the pound to its highest level against the US dollar since July 2018. The euro dropped to its lowest level against the pound since May 2017.

Palladium endured a severe sell-off yesterday .The metal approached the all-time high that was set on Tuesday, but tuned sharply lower ,and the negative move dragged gold down too. Platinum handed back some of its earlier gains.  

At 7.45am (UK time), French GDP will be release and dealers are expecting 0.3% growth in the fourth-qaurter of 2018. The CPI report will be announced at the same time, and it is tipped to increase to 1.7%, from 1.4% in January.

Italian CPI and German CPI will be released at 9am (UK time) and 1pm (UK time) respectively, and the consensus estimate is for 1.2% and 1.7% respectively.

At 1.30pm (UK time) the US will release GDP reading for the final qaurter of last year, and the forecast is 2.3%. Jobless claims is tipped to increase to 220,000, from 216,000.

EUR/USD – has been broadly pushing lower since early January, and if the negative move continues it might retest the 1.1216 area. Resistance might be found at 1.1400 or 1.1500.  

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 1.3472 area. The 1.2775 area region might act as support.

EUR/GBP – while its holds below the 200-day moving average at 0.8860, its outlook is likely to be negative. 0.8500 might act as support. A rally might encounter resistance at 0.8700. 

USD/JPY – has been on the rise since early January, and if the bullish move continues it might target the 112.00 area. A break below 109.55, might bring 108.50 into play. 





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