Market Drivers March 25, 2015

EZ GE IFO Better
Currencies remain in tight range
Nikkei .17% Europe -.34%
Oil $47/bbl
Gold $1191/oz.

Europe and Asia:
EUR IFO 107.9 vs. 107.3
GBP UK Mortgage Approvals 37.3K vs. 36.9K

North America:
USD Durables 8:30

It been a lackluster night of trade in the currency market with most of the majors tracing out very narrow ranges in Asian and early European trade as dollar continued to correct against it trading partners with euro getting a boost from better than expected IFO sentiment data.

The IFO survey printed at 107.9 versus 107.3 eyed with current assessment rising to 112.00 from 111.3 the month prior. Overall the sentiment data from German corporate sector showed that growth in Eurozone’s largest economy continues to expand steadily with IFO anticipating 0.7% increase in Q1 of 2015.

IFO’s Hans Werner Sinn noted that neither Greece nor Russia were having much of a negative impact on German growth and that economic outlook has brightened. As the export powerhouse of the region, Germany is clearly benefiting from the sharp depreciation in the euro, while its corporations are also buoyed by the 40% appreciation in the DAX over the past six months.The combination of lower euro and QE is clearly having the desired effect on German growth, although the pickup in demand is far from torrid.

The EUR/USD popped to a high of 1.0974 but then sold off into 1.0950’s in a clear case of buy the rumor sell the fact, as traders anticipated the positive data in early morning European dealing. The recovery in the pair continues to be capped at the 1.1000 level as the positive signals from the nascent EZ recovery are somewhat offset by better US data.

Today’s US Durables Report can be another case in point. A rebound from last month’s surprising 0.0% levels could be another boost for dollar bulls, suggesting that US capital spending is starting to pick up which would be yet another data point in favor of Fed normalization. Another miss today however, could push the EUR/USD through 1.1000 with conviction as hope will quickly evaporate that the Fed will do anything before September at teh earliest. So for now we remain at key levels as traders await the next move.

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