he most exciting thing to come out of yesterday’s ECB press conference was the brief interruption of proceedings by a protestor, but aside from that we got no indication from Mr Draghi and the ECB that they were contemplating any type of early exit from the planned QE program, despite the recent improvement in some of the latest economic data from some parts of the euro area.
This, combined with a raft of poor economic data from China and the US, kept equity markets buoyant yesterday as expectations of fresh Chinese stimulus
increased in the wake of yesterday’s worse than expected March data, while some even more disappointing US data reinforced the idea that the Federal Reserve was likely to hold off on moving on interest rates for a little while longer.
The resultant weaker US dollar and a stronger oil price,
which closed at its highest levels this year, also gave the energy sector a boost, as US markets closed at a three week high.
The latest industrial production data showed the largest drop in two and a half years
for March, as well as the worst quarterly performance since Q2 of 2009.
The main drag was the oil and gas sector, and on top of that we also got the worst Empire manufacturing survey since December last year, while the latest Federal Reserve Beige Book of economic conditions painted a disappointing overview
of the economy over the last month, with the weather getting a fair number of mentions, though a lot fewer mentions than the same time last year when the weather was a whole lot colder.
In Europe with little in the way of economic data to chew over the focus is likely to be on the start of the IMF/G20 meetings in Washington
and Greek finance minister Varoufakis meeting with President Obama,
where he will be hoping for a sympathetic hearing, as Greece pushes up against its latest deadline for coming to an agreement with its creditors.
Unfortunately for Mr Varoufakis, sympathy is probably the only thing he will receive
in the wake of yesterday’s S&P downgrade of Greece to CCC+ with a negative outlook, and last week’s meeting between Greek Prime Minister Tsipras and Russian President Vladimir Putin.
The new Greek government is slowly realising that when you’re trying to negotiate a deal with your creditors, it pays to at least try and generate some consensus and goodwill amongst some of them, and not cosy up to a Russian President who is probably not the most popular person amongst European and US officials at the moment.
While the ECB continues to increase the ELA program incrementally,
comments from German finance minister Wolfgang Schaueble last night appeared to suggest that any solution before next week’s finance ministers meeting in Riga on 24th April remains unlikely.
The continued deadlock has prompted speculation of a referendum to the Greek people on a possible next move in an attempt to break the logjam.
After the disappointment of this week’s US data
the latest weekly jobless claims are not expected to deviate too much from the steady consistency of the last few weeks despite the slowdown in the US manufacturing sector.
While yesterday’s Beige Book was downbeat about manufacturing,
it was slightly more upbeat about housing a
nd it is hoped that housing starts for March will offset the poor February numbers, with a rise of 15.9%.
Philadelphia Fed manufacturing survey for April is expected to improve to 6 from 5 in March, but given the sharp drop seen in the Empire survey, the prospect of a miss here can’t be ruled out.
– having failed to break below the 1.0500 level we got a strong rebound back to the 1.0720 area. The strength of the move has seen us post a fairly bullish daily candle, which could if we break through the 1.0760 level suggest a return towards 1.0900.
– despite a dip back to 1.4700 yesterday, the prospect of a move back towards 1.5000 remains, after the move through 1.4740 earlier this week. For this to unfold we need to hold above the 1.4680 level. A decline back through 1.4700 towards 1.4565 keeps the risk for a revisit of the 2010 post-election lows at 1.4230.
– we came up short of 0.7150 yesterday, but nonetheless the risk remains for a retest of this level while below the 0.7235 area.
– yesterday’s move through 119.00 is a little concerning, but we’ve thus far managed to rebound back above it. If we stay below 119.70 the US dollar could well move lower towards the March lows at 118.30. We need to push back above the 120.70 level to retarget the highs at 122.00.
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