Tuesday 17th March: European Open Briefing

Global Markets:

  • Asian stock markets: Nikkei up 1.05 %, Shanghai Composite gained 1.15 %, Hang Seng rose 0.20 %, ASX is 0.85 % higher
  • Commodities: Gold at $1154.50 (+0.10 %), Silver at $15.57 (-0.30 %), WTI Oil at $46.07 (-0.15 %), Brent Oil at $54.00 (-0.30 %)
  • Rates: US 10 year yield at 2.068, UK 10 year yield at 1.692, German 10 year yield at 0.273

News & Data:

  • China FDI 17.0 %, Previous: 29.4 %
  • Bank of Japan keeps policy unchanged
  • BoJ’s Kiuchi sees CPI to remain around 0 %
  • RBA: Feb Rate Cut Would Boost House Prices “At the Margin”
  • RBA: Risks Building In Commercial Property Markets
  • RBA: Noted Uncertainty About Behaviour Of Borrowers, Savers In Low Rates Environment
  • RBA: Lower A$ Would Help Achieve Balanced Growth; Remains Overvalued
  • RBA: House Prices In Sydney Were Rising Strongly; Melbourne Solidly
  • RBA: Job Market To Operate With Spare Capacity For Some Time
  • RBA: Recognises Case for Further Rate Cut Might Emerge
  • RBA: Saw Advantage In Waiting For More Economic Data
  • RBA: Judged Appropriate To Hold Cash Rate Steady for the “Time Being”
  • Sweden FinMin: Strong SEK making it harder to boost inflation; wants to support investment in order to boost investment
  • ECB Draghi: Indicators pointing to a sustained recovery; Optimistic about the outlook, but we must continue reforms
  • ECB Draghi: Lower oil, ECB stimulus, reform efforts are all helping Euro Zone economy
  • ECB Draghi: EMU economies and institutions need more convergence, with more sovereignty sharing

Markets Update:

Overnight, the RBA released their meeting minutes. The minutes suggest that the RBA remains on track to cut rates again by 25 bps over the next few months, with April still the most likely timing. The key phrase was that members see it as appropriate to hold the cash rate steady for the time being, but recognize that further easing over the period ahead may be appropriate to foster sustainable growth and keeping inflation consistent with the bank’s target. AUD/USD briefly fell to a low of 0.7610, but bounced from there and consolidated in a rather tight range for the rest of the APAC trading session. Similar price action in NZD/USD, which traded within a 0.7360-90 range. Meanwhile, USD/CAD went for a retest of the 1.2820 resistance level in yesterday’s NY session, but failed to break above. Dealers reported heavy offers linked to an option structure at 1.2825, expiring today at the NY cut (14:00 GMT). Oil had a bit of a bounce in Asia, which boosted the CAD and helped to drive USD/CAD back below 1.28.

EUR/USD broke above 1.06, but failed to sustain momentum there. It is possible that we will see further USD position covering pre-FOMC, but decent selling interest is likely to emerge in the 1.0640/50 area as well as at 1.0680. GBP/USD recovered to 1.4850 yesterday and spent most of the Asian session consolidating in the lower 1.48s. Next key resistance noted at 1.49. USD/JPY was rather quiet as well, as there were no surprises from the BoJ. Most members are optimistic about reaching the inflation target, only Kiuchi said that he expects CPI to stay around 0 %. 120.60 and 121.60/80 the key levels to watch in the pair.

Looking ahead, the main events in the EU session will be the Euro Zone inflation and the German ZEW numbers. In the US, the focus will be on Housing Starts & Building Permits.

Upcoming Events:

  • 06:30 GMT – Bank of Japan Press Conference
  • 10:00 GMT – German ZEW Current Conditions (51.0)
  • 10:00 GMT – German ZEW Economic Sentiment (58.7)
  • 10:00 GMT – Euro Zone CPI (0.6 % m/m, -0.3 % y/y)
  • 10:00 GMT – Euro Zone Core CPI (0.6 % y/y)
  • 10:00 GMT – Euro Zone ZEW Economic Sentiment (58.2)
  • 12:30 GMT – US Housing Starts (1.05mln, -2.4 % m/m)
  • 12:30 GMT – US Building Permits (1.065mln, -0.5 % m/m)
  • 12:30 GMT – Canadian Manufacturing Sales (-1.0 % m/m)
  • 21:45 GMT – New Zealand Current Account (-NZ$3.15bln q/q, -NZ$7.88bln)

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