Trading is relatively subdued in the forex markets today as the quarter is heading for close. Euro turned into sideway trading but is set to end the week as the weakest major currency. In spite of more Brexit news, Sterling is just mixed for the week, up against Dollar, Europeans and Yen. Canadian dollar continues to be supported by firmness in oil price as WTI crude oil is holding on to 50 handle after brief retreat. Aussie follows as risk appetite returned to the markets. In other markets, European indices are mixed while US futures point to a flat open. Gold lost steam as Dollar rebounds and is heading back to 1240.

EC Tusk lays out four issues for Brexit negotiation

European Council President Donald Tusk set out the guidelines for Brexit negotiation with UK. Tusk said that EU doesn’t want to punish UK as "Brexit is punitive enough". But the foremost principle is that talks on trade relationship would only start after the enough progress is made on separation. And a final agreement on trade would not be concluded before Brexit. This is in the opposite to UK Prime Minister Theresa May’s parallel approach.

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Meanwhile, Tusk also mentioned four issues for the first phase of the negotiation. Those include protecting rights of EU citizens in UK and UK citizens in EU; the bill for Brexit based on financial commitments and liabilities; clear legal framework to avoid uncertainties for businesses and institutions; how to maintain a "soft" border between Ireland and Northern Ireland. Tusk also said that EU would "firmly stand by" the proposals while "the talks which are about to start will be difficult, complex and sometimes even confrontational."

Released from UK, Q4 GDP was revised down to 0.6% qoq, finalized. Total business investment dropped -0.9% qoq. Index of services rose 0.7% 3mo3m in January. Current account deficit narrowed to GBP -12.1b in Q4. Nationwide house price dropped -0.3% mom in March. Gfk consumer sentiment was unchanged at -6 in March.

Eurozone CPI dropped sharply to 1.5% yoy

Eurozone CPI slowed sharply to 1.5% yoy in March, down from 2.0% yoy and missed expectation of 1.8% yoy. Core CPI also slowed to 0.7% yoy, down from 0.9% yoy and missed expectation of 0.8% yoy. The data is inline with recent report that ECB would be cautious to any adjustment in its language as markets misinterpreted March’s. Unless there is a resurgence in inflationary pressure, it’s unlikely for ECB to change course this year on monetary policy. Nonetheless, as scheduled, ECB will reduce bond buying by EUR 20b to EUR 60b starting April, and run till at least the end of the year. Also from Eurozone, German retail sales rose 1.8% mom in February. German unemployment dropped -30k in March while unemployment rate dropped to 5.8%.

US core PCE unchanged at 1.8% yoy

From US, personal income rose 0.4% in February while spending rose 0.1%. Headline PCE rose to 2.1% yoy while core PCE was unchanged at 1.8% yoy. From Canada, GDP rose 0.6% mom in January. New York Fed President William Dudley said yesterday that federal funds rate remains "unusually low". And, "it seems appropriate to scale back monetary policy accommodation gradually" Also, economic outlook abroad has "brightened" with risks "significantly lower than they were a year ago." He said two more rate hikes this year "seems reasonable". Dallas Fed President Robert Kaplan said three rate hike this year is still his "base case".

Japan national CPI rose but Tokyo CPI worsened

In Japan, national CPI core rose 0.2% yoy in February, meeting expectations. This is also the first back to back increase in CPI since late 2015. However, it should be noted that Tokyo CPI dropped -0.4% yoy in March, worse than February’s -0.3% yoy and missed expectation of -0.2% yoy. Unemployment rate dropped to 2.8% in February, lowest since 1994. Household spending dropped -3.8% yoy in February,below expectation of -1.6% yoy. Industrial production rose 2.0% mom in February, above expectation of 1.2% mom. Housing starts dropped -2.6% yoy. All in all, the set of data from Japan is not too encouraging.

Elsewhere, New Zealand building permits rose 14.0% mom in February. NBNZ business confidence dropped to 11.3 in March. China PMI manufacturing rose 0.2 to 51.8 in March while non-manufacturing PMI rose to 55.1. UK Gfk consumer sentiment was unchanged at -6 in March, nationwide house prices dropped -0.3% mom in March. Germany retail sales rose 1.8% mom in February.

EUR/USD Mid-Day Outlook

Daily Pivots: (S1) 1.0727; (P) 1.0777 (R1) 1.0814; More…..

EUR/USD engages in sideway trading in early US session. But intraday bias remains on the downside for far. Current fall from 1.0905 should target 1.0494 support next. As noted before, corrective rise from 1.0339 could be completed at 1.0905. Break of 1.0494 should confirm this case and target 1.0339 low. On the upside, above 1.0798 minor resistance will turn bias back to the upside for 1.0905 instead.

In the bigger picture, as long as 1.1298 key resistance holds, whole down trend from 1.6039 (2008 high) is still expected to continue. Break of 1.0339 low will send EUR/USD through parity to 61.8% projection of 1.3993 to 1.0461 from 1.1298 at 0.9115. However, considering bullish convergence condition in weekly MACD, break of 1.1298 will indicate term reversal. this would also be supported by sustained trading above 55 week EMA.

EUR/USD 4 Hours Chart

EUR/USD Daily Chart

Economic Indicators Update

GMT Ccy Events Actual Forecast Previous Revised
21:45 NZD Building Permits M/M Feb 14.00% 0.80% 201%
23:01 GBP GfK Consumer Confidence Survey Mar -6 -7 -6
23:30 JPY Unemployment Rate Feb 2.80% 3.00% 3.00%
23:30 JPY Household Spending Y/Y Feb -3.80% -1.60% -1.20%
23:30 JPY National CPI Core Y/Y Feb 0.20% 0.20% 0.10%
23:30 JPY Tokyo CPI Core Y/Y Mar -0.40% -0.20% -0.30%
23:50 JPY Industrial Production M/M Feb P 2.00% 1.20% -0.40%
00:00 NZD NBNZ Business Confidence Mar 11.3 16.6
01:00 CNY Manufacturing PMI Mar 51.8 51.7 51.6
01:00 CNY Non-manufacturing PMI Mar 55.1 54.2
05:00 JPY Housing Starts Y/Y Feb -2.60% -1.20% 12.80%
06:00 EUR German Retail Sales M/M Feb 1.80% 0.70% -0.80%
06:00 GBP Nationwide House Prices M/M Mar -0.30% 0.30% 0.60%
07:55 EUR German Unemployment Change Mar -30k -10k -14k -17k
07:55 EUR German Unemployment Rate Mar 5.80% 5.90% 5.90%
08:30 GBP Current Account (GBP) Q4 -12.1b -16.0b -25.5b -25.7b
08:30 GBP GDP Q/Q Q4 F 0.60% 0.70% 0.70%
08:30 GBP Index of Services 3M/3M Jan 0.70% 0.70% 0.80%
08:30 GBP Total Business Investment Q/Q Q4 F -0.90% -1.00% -1.00%
09:00 EUR Eurozone CPI Estimate Y/Y Mar 1.50% 1.80% 2.00%
09:00 EUR Eurozone CPI – Core Y/Y Mar A 0.70% 0.80% 0.90%
12:30 CAD GDP M/M Jan 0.60% 0.30% 0.30%
12:30 USD Personal Income Feb 0.40% 0.40% 0.40% 0.50%
12:30 USD Personal Spending Feb 0.10% 0.20% 0.20%
12:30 USD PCE Deflator M/M Feb 0.10% 0.10% 0.40%
12:30 USD PCE Deflator Y/Y Feb 2.10% 2.10% 1.90%
12:30 USD PCE Core M/M Feb 0.20% 0.20% 0.30%
12:30 USD PCE Core Y/Y Feb 1.80% 1.70% 1.70% 1.80%
13:45 USD Chicago PMI Mar 57 57.4
14:00 USD U. of Michigan Confidence Mar F 97.6 97.6



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