Rebound in oil sends risk on the bid
Markets opened lower on Monday on back of Doha meeting over the meeting, where no agreement on the output level of oil was reached. This sent Crude oil down more than 5% and Brent down more than 6% on Monday, but market players saw that as an opportunity to re-enter long positions. In addition to the recovery in oil, decent earnings in the equity markets triggered additional risk taking, where the EUSTOXX50 took home 1.8% while the S&P500 in the US printed new 2016 highs and the S&P Future has tested 2100+ this morning, breaking out from trend resistance projected from the July 2015 highs. In FX markets, the risk taking sent the JPY on the offer with NZDJPY being the best performer overnight. The US Dollar lost ground in general on back of comments from Dudley that the outlook looks good, but the Federal Reserve has to act with caution with regard to interest rate hikes. From Australia, the RBA minutes did not reveal anything new to the markets and investors did not take RBA Governor Stevens words about that an appreciating currency would impact the economy that seriously as the AUD has continued on the bid overnight.
The rebound in oil sent the Canadian Dollar higher across the board with USDCAD printing new 2016 lows this morning at 1.2740 with next support coming in at 1.2680-area.
While yesterday was quite uninspiring on the macro front, today should open up for some more action. At 11CET, the ZEW figures will be released for Germany as well as the Euro zone. Expectations are for an increase in both the German Current Conditions and the Economic Sentiment, whereas the Euro zone Economic Sentiment is expected to drop a tad. Later today, US Housing markets are in focus with the release of the March Building Permits and Housing Starts. Markets are expecting a slight increase in Permits while the Housing Starts are expected to drop marginally. CAD-traders should also watch out for the speech from BoC’s Governor Poloz at 17CET, where news on the monetary outlook will be monitored with great attention. From the UK, BoE’s Carney will also hit the wires later today ahead of Wednesday’s key speech from Chancellor Osbourne, discussing the economic impact of a potential BREXIT. UK markets have fared decently despite the risk of the UK leaving the EU. The FTSE printed 2016 highs yesterday, eyeing the highs from October 2015 at 6488.50 while Cable has been established a 7-figure range around the 50-DMA with a wedge forming.
We expect Euro zone markets to be relatively on hold ahead of Thursday, where the ECB will announce interest rates. While no change is expected, the market will have attention to the balance sheet actions which have the purpose of stimulating the economy. The EUR has traditionally been offered while an ECB president have announced rates and we would not be surprised should this happen again. In EURUSD, we expect the 1.1234-1.1465 range to be the range to play ahead of the release and are generally bullish on the pair.
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