EEuropean markets had a somewhat more subdued session yesterday, with FTSE250 taking center stage with a record high, while FTSE100 returned close to its highest levels this year. The rest of European markets finished slightly lower, although the DAX and Stoxx600 are still a touching distance from their all-time highs from the start of the week.
US markets also traded fairly modestly, with the S & P500 hitting a record close as investors took a cautious stance with stocks trading near record highs.
This rather benign and optimistic environment should see a positive opening for markets here in Europe as investors soak up the minutes from the Fed last night.
Minutes from the March meeting showed that while Fed officials seemed happy with the direction of the US economy, they wanted to see much clearer evidence of further progress before returning to the stimulus button.
This adherence to what the Fed now calls “the results-based orientation” is an integral part of the US central bank’s new policy of not reacting to perceptions of one direction to follow, but waiting for both. targets for higher inflation and full employment have been set. achieved.
While all of this is all well and good for now, with US 10-year yields retreating from their recent highs, one should not forget that last night’s minutes came before last week’s exceptional payroll report. and the very positive updates from the ISM.
These reports bode well for further vigor in Q2, and if the Fed is to give the impression of a central bank ready to be patient, waiting too long also has its dangers.
The latest consumer credit figures in February were nothing short of staggering, rising $ 27.6 billion, the biggest monthly gain since November 2017, and well above expectations of a $ 2.8 billion hike. dollars. The numbers were even more surprising given that February’s retail sales fell 3%.
This huge rebound in borrowing is helping to line up with the recent surge in consumer confidence, and with March retail sales slated for next week, along with the surge provided by new stimulus payments, we could see a lot of it after. the 3% drop observed in February.
It probably seems like a sensible strategy not to want to be seen as a happy trigger when it comes to reducing asset purchases, but the risk is that if the Fed keeps too loose a hold on the reins, the horse could slip off his leash and go wild. , before collapsing into a heap.
Today we can see the latest weekly unemployment claims figures, which after unexpectedly rising to 719k last week, is expected to drop back to 680k, after hitting a revised 658k a few weeks ago. Continuing claims are also expected to drop further to 3.65 million.
The pound had another bad day yesterday, retreating sharply against the euro and the US dollar as its impressive streak of gains came to a shuddering halt, despite growing evidence of an improving economic environment as the he UK economy is bracing for another easing of restrictions next week. Yesterday’s services PMI looked strong with evidence that broader UK hiring trends suggest the prospect of a strong rebound in vacancies as summer approaches.
Today’s economic data is expected to see the UK construction PMI for March at 55, an increase of 53.3 in February.
EURUSD – pressed past the 200-day MA before running out of steam just before 1.1920. Has since retreated. Although we remain below the 1.1920 area, the risk remains of reverting to recent lows at 1.1704.
GBPUSD – continues to look a bit on the soft side, with support at 1.3710 area, and below at 1.3670. A passage at 1.3650 opens the 1.3550 zone. A change to 1.3920 recible to 1.4020.
EURGBP – tightened all the way through the 0.8620 area increasing the prospect that we could see further gains towards 0.8730. The 50-day MA is currently leveling off with troughs expected to remain above the 0.8540 area.
USDJPY – fell just below 111.00 area last week, and has since fallen below 110.20 area, which is now becoming resistance. We have retreated to 109.50 and may head lower to 108.70, below the 110.20 area.
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