We saw another third positive session in a row from US markets yesterday, buoyed up by a combination of better than expected industrial production data for February and March, a reiteration from Fed chief Janet Yellen of the central bank’s commitment to maintain an accommodative low rate policy, and lastly an upbeat Beige Book report from the Fed regions.
It was Janet Yellen’s comments about the weak outlook for inflation
that appear to have helped underpin stocks the most, and raised the prospect of lower rates well beyond the end of the actual tapering program.
Given these comments it really begs the question as to why FOMC members even bother with their dot chart analysis of rate rise projections
, given it would seem that they seem to be about as much guide to the Feds actual rate intentions and pledges, as a chocolate teapot.
This inconsistency between projections and policy statements was alluded to by the Atlanta Fed’s Dennis Lockhart
yesterday, though in slightly more nuanced terms than the ones I just used, but it goes to the absolute shambles the Fed’s current communications policy has become.
There were also some encouraging signs from the Beige Book
which saw a pick-up in consumer spending, which had shown some weakness in the last report due to the cold weather, while broader economic activity also showed a marked improvement
With the economic calendar in Europe fairly light today and no further negative surprises from the Ukraine the expectation is for markets to finish the week on a positive note
, with a slightly lower to flat open this morning.
With that in mind markets are likely to have a wary eye on today’s talks in Geneva between officials of the EU, US, Ukraine and Russia in an attempt to ratchet down the tensions that have slowly grown over the past few days.
The main focus is set to be on the latest US weekly jobless claims
as well as the latest Philadelphia Fed survey for April
. Weekly claims are expected to increase from the seven year lows we saw last week of 300k to something around 315k.
As for the Philadelphia Fed business activity survey for April
we can expect to see an improvement from March’s reading of 9 to 10, though there is always the potential for a negative surprise, particularly after this week’s disappointing Empire manufacturing number which slid sharply to 1.3 from 5.6.
– the euro continues to find it difficult to rally with any conviction remaining well short of the recent highs at 1.3970, peaking at 1.3900 last week. As such we could well start to drift lower, but for now we appear to be finding support at 1.3780. There is also long term trend line support from the lows last year coming in at 1.3730. A break below the April lows at 1.3675 could well see a move towards 1.3500.
– we’ve seen another test of the 1.6820 level and have started to inch beyond it but the move has lacked a little conviction, meaning that we continue to have some resistance here. As such this level continues to remain important with respect to further progress. We need a move above 1.6880 to put the pound above its November 2009 highs. While below the risk of a pullback towards 1.6555 remains a possibility, on a break below 1.6670.
– continues to range trade with a cap currently around the 0.8300/10 level. Only a move below the March lows at 0.8205, argues for a move towards the lows this year at 0.8158.
The resistance at the 200 day MA at 0.8410 remains a key obstacle to further gains.
– continues to range trade with the next key support at the 101.20 area and the March low. A move through 101.20 opens up the 200 day MA at 100.80, a break of which could well see a move towards 98.60. Any recovery now needs to push back through 102.80 to stabilise.
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