Having seen European markets reap the benefits of a weaker euro this week,
yesterday’s rebound in the single currency prompted a little bit of a pause in upward momentum in European stocks and a slightly weaker session, though it won’t be enough to prevent the DAX posting its ninth successive positive week in succession.
The FTSE100, on the other hand will probably post its second successive negative week in a row,
such are the currency divergences being played out in global markets at the moment.
The weaker US dollar on the other hand helped US markets regain some of their recently lost mojo as both the Dow and S&P500 pulled back strongly
, helped by a disappointing February retail sales report. Coming as it did on the back of two previously disappointing months, the weak number has once again seeded doubts about how the Federal Reserve might react next week to a continued softening of US data, and a slowdown in US GDP growth for Q1.
We’ve seen the US dollar rally strongly since last Friday’s payrolls numbers,
in expectation that we could get a signal from the Fed next week that they might look at changing their forward guidance in next week’s statement
, however yesterday’s retail sales report showed quite starkly that despite what appears to be a robust labour market, domestic demand remains painfully weak.
US retail sales have now declined for three months in a row,
at a rate of -0.9%, -0.8% and -0.6%, the worst run since the Lehman crisis, which rather begs the question as to why the Federal Reserve would even want to consider a hike in rates with that sort of demand backdrop?
Meanwhile in Europe the war of words between Germany and Greece continued yesterday
as both sides exchanged insults with the Greek ambassador complaining about some remarks allegedly made by the German finance minister Wolfgang Schaueble about Greece’s finance minister Yanis Varoufakis, at the same time as re-opening old wounds about German WW2 reparations.
The European Central Bank also came under fire from Varoufakis yesterday
for “asphyxiating” the country, despite it once again agreeing to lift the ELA ceiling by another €600m to €69.4bn so that Greek banks can remain functional.
Having secured €555m already this week the Greek government
has resorted to raiding pension funds and delaying payments to suppliers so that it can repay the IMF the sums of €270m today as well as another €450m on Monday.
These continued spats should make for an interesting conversation when Greek Prime Minister Alexis Tsipras meets EU Commission President Juncker
in Brussels today.
On the data front today we have the latest UK construction output figures for January
, which are expected to show a rise of 1.3%, up from 0.4% in December.
In the US February factory gate prices are expected to remain soft
remaining at 0%, unchanged from January.
– having made a new 12 year low at 1.0495 the euro has managed to rebound back through the 1 0600 level. The question now is whether this reaction prompts a larger rebound towards the 1.0800 level as short positions get squeezed. A move through 1.0500 would open up further losses towards parity.
– the punched lower yesterday pushing towards its 2013 lows at 1.4820. If we break below this key support then the risk of a move towards the May 2010 lows at 1.4230 increases. To stabilise we would need to see a rebound back through the 1.5130/40 level, and then behind that at the 1.5350 level.
– yesterday’s rebound in the form of strong bullish daily candle could suggest the beginnings of a rebound having punched back through the 0.7110 level, which suggests a further move towards resistance at the 0.7230 level. Only a concerted break below 0.7000 could potentially open up a move towards 0.6600 and levels last seen in late 2007.
– the failure to push beyond the new multi-year high at 122.05 earlier this week could prompt a pull back towards the 119.80 area in the short term, but while we hold above this level the prospect of a move towards the 2007 highs at 124.20 remains.
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