Thursday 9th April: European Open Briefing

Global Markets:

  • Asian stock markets: Nikkei up 0.60 %, Shanghai Composite lost 1.25 %, Hang Seng rallied 4 %, ASX fell 0.40 %
  • Commodities: Gold at $1196 (-0.50 %), Silver at $16.38 (-0.50 %), WTI Oil at $51.01 (+1.15 %), Brent Oil at $56.18 (+0.30 %)
  • Rates: US 10 year yield at 1.907, UK 10 year yield at 1.582, German 10 year yield at 0.162

News & Data:

  • Australia AIG Construction Index 50.1, Previous: 44.0
  • New Zealand PM Key: Kiwi Dollar Likely To Decline Further Against USD — CNBC
  • New Zealand PM Key: History Shows Currency Intervention Isn’t Successful — CNBC
  • PBOC Fixes Yuan Reference Rate At 6.1338 (previous 6.1345)
  • Bank Of Korea Leaves Key Interest Rate Unchanged At 1.75%
  • Hang Seng Index Climbs Above 27,000 For 1st Time Since Jan 2008

FOMC Minutes:

  • Fed officials divided on whether June rate hikes warranted
  • Almost all officials wanted to drop patient guidance in March
  • No simple criteria for timing of first rate increase
  • Several say economic data, outlook likely warrant rate increase in June
  • Others say effects of energy price decline, dollar strength point to rate hike in later 2015
  • Several expect fairly gradual pace of normalization
  • Most saw risk to economic, labour market outlook as nearly balanced
  • Several saw dollar appreciation restraining exports, economic growth
  • China slowdown, Greece problems, geopolitical tensions seen as international outlook risks
  • Fed staff revise down medium-term GDP growth outlook due to strong Dollar

Markets Update:

It was rather quiet overnight, with no important data releases. The market is still digesting the FOMC minutes, which have been released in yesterday’s NY session. While there is not really anything new in the minutes, traders have been surprised by the fact that some FOMC members still see a June rate hike as possible. Fed’s Dudley was speaking yesterday and made some similar remarks, which helped the USD catch a bid.

In the commodities market, precious metals are under renewed pressure, while oil is recovering after a big move down yesterday. Gold consolidated around $1202 for a while, which was the weekly open level, but eventually broke lower. Silver gave the first signs that metals are likely to head lower, as it broke sub-$16.60 support and eventually extended losses towards $16.35. Next significant support seen at $16.05 and at $1178 in Gold.

In the FX market, not much has changed since the NY close and overnight ranges are tight. EUR/USD traders are now focusing on the 1.0700/10 support area, and if we see a clear break below, there is not much in the way for a 1.0460 re-test. Selling rallies the preferred strategy for the pair, with 1.0830 the key intraday resistance level. Similar price action in GBP/USD. The pair again failed to break above 1.4980 and sharply reversed from there, which suggests bears are clearly in control and downside momentum could increase within the next few sessions. Initial support seen at 1.4800/05 and then 1.4740.

Upcoming Events:

  • 07:00 BST – German Industrial Production (0.2 % m/m)
  • 07:00 BST – German Trade Balance (€20.2bln)
  • 07:00 BST – German Exports (1.0 % m/m)
  • 07:00 BST – German Imports (1.2 % m/m)
  • 09:30 BST – UK Trade Balance (-£9.0bln)
  • 12:00 BST – Bank of England Interest Rate Decision (0.50 %)
  • 13:30 BST – US Initial Jobless Claims (285k)
  • 13:30 BST – Canadian Building Permits (5.0 % m/m)

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