‘We shouldn't get fixated on coronabonds’, said the European Central Bank (ECB) President Christine Lagarde in an interview with Le Parisien on Thursday.
Things take time in Europe.
There can be other forms of European solidarity.
Such as mutualised spending from a shared budget or a reconstruction fund.
As worries over the standoff among the Eurogroup persist, President Lagarde’s comments add to them, knocking-off EUR/USD to a fresh daily low of 1.0840, where it now wavers.
The Office for National Statistics (ONS) published the UK industrial and manufacturing production data on Thursday, with the overall industrial activity bettering expectations in February.
Manufacturing output arrived at +0.5% MoM in February versus +0.1% expectations and +0.2% booked in January, while total industrial output came in at +0.1% vs. +0.1% expected and +0.2% last.
On an annualized basis, the UK manufacturing production figures came in at -3.9% in Feb, beating expectations of -4.0%. Total industrial output dropped by 2.8% in Feb, against a -2.9% reading expected and the previous -2.9% print.
Separately, the UK goods trade balance numbers were published, which arrived at GBP -11.487 billion in Feb, versus GBP -6.00 billion expectations and GBP -5.759 billion last. Total trade balance (non-EU) came in at GBP -5.573 billion in Feb versus GBP 0.215 billion previous.
The GBP/USD pair flirts with lows near 1.2370 on mixed UK data flow, as the focus remains on the UK PM Boris Johnson’s health condition and coronavirus stats for fresh directives.
- UK GDP arrives at -0.1% MoM in Feb vs. +0.1% expected.
- GBP/USD keeps losses below 1.2400 on downbeat data.
The UK GDP monthly release showed that the UK economy showed a contraction in February, arriving at -0.1% versus +0.1% expected and 0.0% previous.
Meanwhile, Index of services (February) arrived at +0.2% 3M/3M vs. +0.1% expected and 0.0% last.
About UK GDP
The Gross Domestic Product released by the National Statistics is a measure of the total value of all goods and services produced by the UK. The GDP is considered as a broad measure of the UK economic activity. Generally speaking, a rising trend has a positive effect on the GBP, while a falling trend is seen as negative (or bearish).
The pound was little changed on the UK GDP contraction, as GBP/USD kept losses near 1.2370 region, slightly off the 1.2364 lows.
In light of advanced readings from CME Group, open interest and volume in JPY futures markets shrunk by around 2.6K contracts and by nearly 6.4K contracts, respectively, on Wednesday.
USD/JPY still sees a test of 110.00
USD/JPY managed to regain some ground in the last couple of sessions. Wednesday’s drop in open interest and volume warns against further depreciation of the Japanese safe haven, leaving the upside somewhat capped in the near term.
- USD/INR remains on the front foot after bouncing off the previous day.
- Wednesday marks the jump in Indian coronavirus cases, death toll.
- Indian government announces quick tax refunds, Goldman Sachs expects Indian GDP to plummet to a multi-decade low.
- The economic calendar has the key data/events to offer a busy data ahead, virus updates keep the helm.
Although the Indian government flexes muscles to jostle with the coronavirus (COVID-19) with multiple measures, some in the pipeline, the surge in the pandemic data keep USD/INR on the bids. The pair recently refreshed the record high to 76.56, currently up 0.65% around 76.44, ahead of the European session on Thursday.
Early disbursement of tax refunds and multiple aid measures for the small businesses fail to defy the call from the Goldman Sachs that signaled the Indian economy to mark multi-decade low GDP growth of 1.6% during the financial year 2021 (FY21).
The reason could be traced from the mounting numbers of economists that predict a huge gap between the need and availability of the aids. Additionally, the surge in the virus numbers to the highest on Wednesday added downside pressure on the Indian rupee.
On a broader front, markets in Asia remain mixed with Indian bourses cheering expected further inflow of funds while the US 10-year Treasury yields remain under pressure around 0.75%.
Even if the virus updates and the combat measures will keep the spotlight, Indian Industrial Production (IIP) data and the US Jobless Claims, coupled with Producer Price Index (PPI) and Michigan Consumer Sentiment, offer additional catalysts to watch. Further to increase the burden on the traders, the US Federal Reserve Chairman Jerome Powell will be up for a speech around 14:00 GMT.
It’s worth mentioning that markets in India will be off on Friday due to the Good Friday.
Even short-term selling pressure is ruled out unless the pair slips below the two-week-old support line, currently near 75.77. On the upside, 77.00 round-figure is on the bull’s radar.
Italy’s daily newspaper, La Stampa, reports on Thursday, the government is reportedly said to extend the lockdown by two weeks.
The coronavirus outbreak induced lockdown measures currently expire on April 13th. However, given the rise in the new infections in Europe’s third-largest economy, its almost certain that the measures will likely be extended.
Meanwhile, Economy Minister Roberto Gualtieri said that all 400 bln euros in new guarantees for bank loans will all be issued this year.
Government could consider direct intervention to protect companies particularly exposed to market turbulence resulting from coronavirus emergency - paper
When asked whether plans for treasury to exit Monte dei Paschi were on track, says coronavirus emergency has "slowed down" matters but remains confident, says talks with the EU Commission resumed in these days.
Treasury could consider issuing additional debt instruments for retail investors to boost state financing "regardless of the outcome of European agreements".
EUR/USD remains unfazed
EUR/USD shows little reaction to the above headlines, as it wavers in a 10-pips tight range around 1.0860 in the last hour.
CME Group’s flash data for GBP futures markets saw open interest retreating for the fourth consecutive session on Wednesday, this time by just 159 contracts. In the same line, volume shrunk by nearly 26.3K contracts, reversing the previous build.
GBP/USD faces strong hurdle at 1.25
Wednesday’s uptick in Cable was amidst declining open interest and volume, hinting at the idea that extra gains look somewhat limited, at least in the near term. In this regard, the 1.2500 area still remains a tough barrier for the time being.
Here is what you need to know on Thursday, April 9:
The market mood remains cautiously optimistic in what seems like the "calm before the storm." The safe-haven dollar and yen losing some ground ahead of a packed day that is all related to the coronavirus pandemic. The disease has infected nearly 1.5 million people and taken the lives of nearly 89,000.
While the US and the UK have seen the deadliest day yet, there are signs that the disease is peaking in both countries. UK Prime Minister Boris Johnson has spent the third night in intensive care but his condition is somewhat improving. The UK cabinet led by Dominic Raab is set to extend the shuttering of the economy.
Italy, Spain, France, and German cases are also slowing down, but the improvement is gradual and all have either extended or considering extending the lockdowns.
Apart from further COVID-19 updates, the day before the long Easter holiday is packed with six critical events that are set to rock markets:
1) Eurogroup: Finance ministers from eurozone countries reconvene virtually in another attempt to hammer out a joint economic response to the disease. A dispute over debt-sharing was at the center of the breakdown of previous talks earlier this week. Christine Lagarde, President of the European Central Bank, urged countries to get their act together. The ECB releases its meeting minutes from the latest rate decision, but that will likely be overshadowed by the Eurogroup meetings.
See Coronabonds: Turning a health crisis with a political one? EUR/USD parity in sight again
2) OPEC+ meeting: Oil prices have been trading in high volatility as Russia, Saudi Arabia, OPEC countries and other petrol producers – including from the US – try to find common ground on reducing production amid falling demand. Storage for the black gold is filling up, according to the latest inventory data. The latest news reflects ongoing disagreements.
3) Canadian jobs report: The loonie is set to experience extraordinary volatility amid the OPEC+ conference and Canada's jobs report. Ottawa has taken steps not only to support the unemployed but also to keep people at work while they are confined to their homes. Will it pay off. The figures may have an impact beyond the C$.
See Canadian jobs preview: Lose-lose situation for the loonie and two parallel developments to watch
4) US jobless claims: After hitting an inconceivable 6.648 million level in the week ending on March 28, the data for the one ending on April 4 is set to show a drop to 5.250 million. Continuing claims are also of interest. Unemployment applications have become a leading figure while Non-Farm Payrolls are lagging behind. Producer price figures for March are also due out at the same time.
See: Jobless Claims Preview: Is there an unemployment encore?
5) US consumer confidence: The University of Michigan's preliminary Consumer Sentiment figures for April is set to show a considerable fall in confidence to 75 points from 89.1 in the final read for March. This report will have already captured the mood after massive stay-at-home orders have come into effect.
See: Consumer Sentiment Preview: Setting a dismal standard
6) Powell's speech: The Federal Reserve has taken drastic steps to mitigate the economic fallout from coronavirus, as the minutes from the March 15 emergency meeting have shown. After slashing rates to 0% back then, the Fed unleashed unlimited Quantitative Easing later on. And now, Jerome Powell, Chairman of the Federal Reserve, will talk about the economy at the Brookings Institute.
Cryptocurrencies have been consolidating their gains, with Bitcoin hovering around $7,300.
A Bank of Japan (BOJ) official is now on the wires, via Reuters, expressing his take on the Japanese economy following the release of the central bank’s economic assessment report.
Coronavirus outbreak is inflicting severe damage on Japan’s regional economies.
Must scrutinize impact of pandemic on regional economy as developments could change sharply.
It is first time since January 2009 for BOJ to cut economic assessment of all 9 regions.
- BOJ downgrades economic assessment for all nine regions amid coronavirus crisis
GBP/USD has been edging higher amid a more upbeat market mood and as UK Prime Minister Boris Johnson's condition has improved after the third night in intensive care. How is cable positioned on the technical chart?
The Technical Confluences Indicator is showing that pound/dollar is trading within a range between 1.2376 to 1.2388, which is a cluster of lines including the Simple Moving average 5-4h, the Bollinger Band 1h-Middle, the Fibonacci 38.2% one-day, and the Fibonacci 61.8% one-week.
Looking up, the first target is 1.2427, which is the convergence of the BB 1h-Upper, the BB 4h-Upper, and the Pivot Point one-week Resistance 1.
The next cap is at 1.2479, which is the previous week's high, followed by 1.2517, where the Fibonacci 61.8% one-month hits the price.
Support awaits at 1.2350, which is the confluence of the BB 1h-Lower, the SMA 50-4h, the SMA 10-one-day, and the Fibonacci 61.8% one-day.
Further down, another cushion awaits at 1.2311, where the Fibonacci 38.2% one-week and the PP one-day Support 1 converge.
This is how it looks on the tool:
The Confluence Detector finds exciting opportunities using Technical Confluences. The TC is a tool to locate and point out those price levels where there is a congestion of indicators, moving averages, Fibonacci levels, Pivot Points, etc. Knowing where these congestion points are located is very useful for the trader, and can be used as a basis for different strategies.
This tool assigns a certain amount of “weight” to each indicator, and this “weight” can influence adjacents price levels. This means that one price level without any indicator or moving average but under the influence of two “strongly weighted” levels accumulate more resistance than their neighbors. In these cases, the tool signals resistance in apparently empty areas.
Learn more about Technical Confluence
- Silver prices reverse the previous day’s losses with gains.
- Normal RSI conditions keep favoring range-bound trading between short-term key EMAs.
- February’s low can lure the bulls during the upside, the resistance-turned-support line can check the bears alternatively.
Despite reversing the previous day’s losses, with 0.65% gains to $15.06, silver prices remain between short-term key EMAs ahead of Thursday’s European session.
While a sustained break beyond a six-week-old falling trend line favor buyers to confront a 50-day EMA level of $15.67, failures to cross 50% Fibonacci retracement of February-March drop signals pullback to $14.78 support comprising 21-day EMA.
It should also be noted that the industrial metal remains above the multi-day-old falling resistance line, now support, around $14.40, which also nears 38.2% Fibonacci retracement level.
During the bullion’s rise past-$15.67, 61.8% Fibonacci retracement level of $16.14 may offer an intermediate halt to February month low close to $16.40.
Alternatively, the current month’s low near $13.80 can entertain the sellers below $14.40.
Silver daily chart
According to the German disease and epidemic control center, Robert Koch Institute (RKI), the number of confirmed coronavirus cases rose to 113,296, with a total of 2,349 deaths reported on Thursday.
Cases increased by 4,974 in Germany, the most in five days. The death toll jumped by 246, a tad lower than Wednesday’s 254 increase.
The institute reported that over 46,300 people are estimated to have recovered from the respiratory illness.
The virus updates fail to have virtually no impact on the shared currency, as EUR/USD keeps its range around 1.0860, up 0.08% so far.
Open interest in EUR futures markets increased for the second session in a row on Wednesday, this time by just 105 contracts, according to preliminary figures from CME Group. Volume, instead, prolonged the erratic performance and went down by almost 36K contracts.
EUR/USD faces extra consolidation
EUR/USD’s negative price action was accompanied by a small uptick in open interest on Wednesday, allowing for an extension of the leg lower. However, the choppy activity in volume also favours some consolidation in the short-term horizon.
In its latest quarterly report, the Bank of Japan (BOJ) downgrades the economic assessment for all of its nine regions, in the face of the impact of COVID-19.
The assessment downgrade fails to affect the yen, as USD/JPY keeps its range play intact below 109.00, awaiting fresh trading impetus from the critical US Jobless Claims and Fed Chair Powell’s speech. The spot was last seen trading at 108.93, up 0.12% on a daily basis.
- DXY hovers around 100.00 ahead of the jobs report.
- Focus stays on the COVID-19 and the impact on the economy.
- US Initial Claims, Producer Prices, advanced U-Mich next on tap.
The US Dollar Index (DXY), which gauges the greenback vs. a bundle of its main competitors, is alternating gains with losses around the 100.00 mark on Thursday.
US Dollar Index now looks to the weekly Claims
The index is extending the erratic performance in the second half of the week and appears to be stabilizing around the 100.00 neighbourhood following Monday’s weekly tops in the boundaries of 101.00 the figure.
In the meantime, price action in the global markets keeps looking to the developments from the coronavirus and the negative effects on the economy as well as the increasing prospects of a global recession.
Later in the session, markets’ attention will remain on the weekly report on Initial Claims, particularly after the recent steep observed in the last couple of weeks of around 10 million claims.
What to look for around USD
DXY enters the second half of the week in a cautious bias, as market participants continue to look to headlines from the COVID-19 for direction. In the very near term, the publication of the weekly report on the labour market will be once again in centre stage later in the NA session. On the supportive side for the buck, market participants seem to prefer the dollar vs. other safe havens like the Japanese yen and the Swiss franc in cases when risk aversion kicks in, all helped by its status of “global reserve currency” and store of value.
US Dollar Index relevant levels
At the moment, the index is receding 0.02% at 100.14 and faces the next support at 99.77 (weekly high Apr.7) followed by 98.27 (weekly low Mar.27) and then 98.14 (200-day SMA). On the upside, a break above 100.93 (weekly/monthly high Apr.6) would open the door to 101.34 (monthly high Apr.10 2017) and finally 102.99 (2020 high Mar.20).
Following an upbeat start to the Asian session this Thursday, the sentiment turned sour, as the coronavirus spread quickened on both sides of the Atlantic. Also, a sense of caution crept in in the lead up to the critical US Jobless Claims, OPEC+ meeting and Fed Chair Powell’s speech.
Meanwhile, the World Bank downgraded growth outlooks for developing countries in Europe, Central Asia. The Asian stocks traded mixed alongside US equity futures amid risk-aversion while Gold treaded water around 1650 levels. Oil prices rallied on hopes of OPEC+ output cuts, with WTI flirting with $26 mark.
Most majors are stuck in thin trading ranges, as the US dollar trades broadly subdued. USD/JPY traded listless between 108.80-109.10 levels. AUD/USD, however, enjoyed some good two-way price movements on the Reserve Bank of Australia’s (RBA) Financial Stability Review report. The aussie still managed to hold fort above the 0.6200 level. USD/CAD remained offered above 1.4000 despite the oil-price strength.
Among the European currencies, EUR/USD ranged above 1.0850, having failed several attempts towards 1.0900 while the cable traded modestly flat below 1.24, as traders await the UK Foreign Secretary Raab’s cobra emergency meeting.
Main topics in Asia
France to extend lockdown beyond April 15, PM Macron will address the nation on Monday
Coronavirus update: US coronavirus deaths cross 14,300, second highest in world behind Italy
Fed’s Kaplan: US GDP may shrink 25% to 35% in second quarter, then grow in second half
Trump: We are much closer to getting our country back to where it was
China's Hubei province reports zero new cases on April 8 vs zero on April 7
BoJ’s Kuroda: Economic uncertainty is very high
NZ PM Ardern: The country will not be exiting the shut in early
RBA’s Financial Stability Review: Financial system was in a strong position heading into virus impacts, faces increased risks
BOK keeps rates on hold at 0.75%, monitors impact of the March 16 emergency rate cut
UK government ministers to extend coronavirus lockdown beyond 3 weeks - Reuters
NZ Treasury: Economic activity has fallen abruptly as Govt responds to the coronavirus-led health risks
BOK’s Lee: S. Korean economic growth depends on spread of coronavirus
Aichi Prefecture asks govt to place it under state of emergency over coronavirus – Japan Times
Coronavirus update: Australia records lowest infection rate in three weeks
Key focus ahead
Markets gear up for an eventful Thursday’s macro calendar that will wrap the Good Friday-shortened week, with the next data of relevance likely to be the UK monthly growth figures, Industrial Production and Trade Balance report, all dropping in at 0600 GMT. The German Trade Balance and Current Account data will soon be reported at 0700 GMT. Later in the European session, the UK NIESR GDP Estimate is also slated for release.
In the NA session, the critical US Jobless Claims data will be released at 1230 GMT alongside the releases of the US Producer Price Index (PPI) and Canadian Employment data. Later on, at 1400 GMT, the focus will be on the speech by the US Federal Reserve (Fed) Chairman Jerome Powell and the US Michigan Preliminary Consumer Sentiment data.
Apart from the economic releases, the OPEC and non-OPEC producers (OPEC+) meeting to discuss the output cuts is likely to steal the show and poses big risks for the oil and CAD traders. Meanwhile, the virus updates and dollar dynamics will continue to play a pivotal role.
EUR/USD turns indecisive ahead of EU ministers' meeting
EUR/USD is lacking a clear directional bias as the European Union finance ministers struggle to agree on a coronavirus economic rescue package. ECB calls for 1.5 trillion euros in fiscal measures.
GBP/USD clings to modest gains ahead of UK’s data dump
GBP/USD registers a three-day winning streak on early-Thursday. The UK may extend the coronavirus-led lockdown, PM Johnson remains stable in the ICU. A busy economic calendar can offer additional catalysts.
US Initial Jobless Claims Preview: Is there an unemployment encore?
Initial unemployment claims expected to be 5.250 million. Three-week total would be more than 15 million, 10% of workforce. US dollar could benefit from reinforced risk aversion.
What to expect from OPEC and G20
The main focus will be on the OPEC meeting. Investors will be eager to see if the price war between Saudi Arabia and Russia will end with an agreement by all parties to cut world production by 10 million barrels.
- Asian equities flash mixed signals as expectations of further easing confronts rising pandemic fears.
- The Coronavirus numbers from the US/UK challenge market sentiment but Australia marked early hopes.
- US President Trump pushes for phased re-start.
- A busy economic calendar ahead.
With early hopes of the US restart and further easing from the BOJ confronting a jump in the coronavirus (COVID-19) cases, stocks in Asia remain mixed during the pre-Europe session on Thursday. While portraying the move, MSCI’s index of Asia-Pacific shares marks 0.85% of gains whereas Japan’s NIKKEI points 0.70% loss by the press time.
Australia’s ASX 200 mark 2.40% gains to 5,330 on the lowest infection figures in three weeks while South Korea’s KOSPI rose 1.18% to 1,830 following the Bank of Korea’s (BOK) no rate change. Further, shares in New Zealand bear the burden of Treasury’s downbeat comments while those from China cheer one more day without any new cases in the epicenter Hubei.
Additionally, Indian equities remain positive following the government’s extra-efforts to help the citizens amid the lockdown.
It should also be noted that US President Donald Trump earlier reiterated his call to restart the economy sooner. On the other hand, lockdowns in the UK and Spain are likely to be extended from their initial deadlines.
Amid all these, US 10-year Treasury yields lose two basis points (bps) to 0.745% whereas the US stock futures also fail to follow Wall Street’s upbeat performance.
Moving on, investors will have a handful of events from the UK and the US, not to forget the OPEC+ and the EU meetings, which will offer a busy day ahead.
Turkish Lira dropped to a 20-month low on Wednesday, boosting demand for the put options (bearish bets) on TRY and sending one-month risk reversals to the highest level in 12 months.
Lira fell to 6.7920 per US dollar, a level last seen in August 2018, having begun the year at 5.95.
Meanwhile, one-month risk reversals for the Turkish lira, a gauge of demand for options on the currency rising or falling against the dollar, rose to 7.80 to hit the highest level since April 2019, indicating investors are adding bets (buying puts) to position for sustained weakness in the local unit.
Lira's recent slide also pushed the implied volatility metrics to the highest level in a year, according to Reuters News.
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