Risk on the bid despite elevated US Inflation figures

Good morning,

Following a few weeks of a sell-off in equities, global markets rebounded last week on back a slight recovery in oil prices following a freeze agreement of Russian and Saudi production. Overall, global data came out on the weakish side with mixed data from developed countries. On the monetary side, neither the FOMC nor the ECB added new information to the markets in their respective minutes and markets are still expecting a Fed hike in June and another easing from the ECB in March. On the political scene, the meeting between in the EU Council between the UK and the rest of the EU concluded with UK PM Cameron announcing a UK referendum on the 23rd of June. This is definitely good news for markets, but there is still a great deal on uncertainty with regards to the UK economy and direct effects of a potential Brexit. Sterling-pairs have been hammered and we expect additional pressure building until there is a solution in place. GBP/USD is this morning again on the offer with the 2016 lows at 1.4079 in sight. Below this level, there are no clear signs of support, which would open up for a test of the March 2009 lows around 1.3650 before 2009 lows at 1.35.

Last week on Friday, the US inflation figures surprised to the upside where the yearly figures (1.4% for the Headline figure and 2.2% for Core) are at the highest since June 2012. The market reaction in USD-pairs was quite limited with the US Dollar depreciating a tad as investors end of week added to long risk. EUR/USD still stuck in an intra-day range of 1.1060-1.1140 while USD/JPY continued to sell-off with support established at 112.35.

This morning, we have seen a string of PMIs released from the Euro Zone for February. Despite all PMIs falling below expectations, they were all above 50, which signals expansion. EUR lost a little ground on this with EUR/USD taking out Asian lows and is currently trading around 1st Pivot support at 1.1080-area.

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