Market Drivers March 31, 2015

Euro tumbles flirts with 1.0700
UK GDP better than forecast
Nikkei -1.05% Europe -.11%
Oil $47/bbl
Gold $1179/oz.

Europe and Asia:
AUD Private Sector Credit 0.5% vs. 0.5%
EUR GE employment -15K vs. -10K
GBP GDP 0.6% vs. 0.5%
EUR CPI -0.1% vs. -0.3%

North America:
CAD GDP 8:30

USD Chicago PMI 9:45

The EUR/USD resumed its downward trend in early European trade today flirting with the 1.0700 figure before finding support just ahead of that level as concerns about the impasse with Greece trumped relatively steady economic data.

Greece continued to weigh on investors minds as wrangling continued over the terms of the new bailout and although the country is an afterthought on an economic scale, the political ramifications of Grexit remain a worry for the market.

On the economic front the data was generally in line with German unemployment rolls continuing to improve as they declined -15K from -12K eyed. Flash CPI estimates also came in line at -0.1% – and while still deflationary – this was better than last month’s reading of -0.3%. At very minimum the economic conditions in Europe appear to have stabilized and we will have to see if over the next several months, the credit inflows from QE will help stimulate final demand.

For now however, the EUR/USD is clearly capped by 1.1000 level to the upside and 1.0500 to the downside as markets look to this side of the Atlantic for further clues to the dollar rally. Until the Fed provides an unambiguous signal that it is finally ready to normalize monetary policy we may tread this well worn price range for a while.

Elsewhere in UK the data was also slightly mixed with final GDP a bit better at 0.6% versus 0.5% eyed but the Current Account expanding to -25.3B vs,. 21.2B forecast. Cable held up relatively well finding support ahead of the 1.4750 level but the pair remains in the downtrend against the greenback as well and is unlikely to stage a meaningful bounce unless the market becomes convinced that the BoE will be “second to hike” following the Fed. For now such a scenario seems far from certain and the pair therefore is trapped in the 1.4600-1.5000 range as markets await further clarity on policy.

In North America today the calendar remains light with only Chicago PMI on the docket. The full deluge of eco data starts tomorrow with ADP and ISM Manufacturing, followed Friday by the all important NFP report. Meanwhile USD/JPY continues to trade well with the pair holding above the key 120.00 figure as markets maintain confidence in US data. Today the key level for dollar longs will be the 120.50 area and if the pair could capture and hold it, momentum sentiment towards the buck could start to accelerate once again. .

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