Draghi, Osbourne and US Housing Market in Focus
After the plunge in oil on Monday, where risky assets sold off on back of the “no agreement”-deal in Doha, most of the lost ground was recovered yesterday. Due to the current high correlation between oil prices and risk, it seems that oil is leading the price action. On the macro front, we saw better than expected ZEW figures from the Euro zone and weak figures from the US Housing market, where both Building Permits and Housing Starts disappointed the markets. This made gold spot make a decent comeback, but the precious metal is overall sideways trading in the 1206-1285-area. Fixed income saw a general upward pressure on yields. On the political side, Donald Trump and Hilary Clinton won their primaries in New York.
Overnight, markets in Asia were mixed and lacking clear direction. In Japan, the Reuters Tankan came out better than last time, but no real reaction has been seen. JPY is on the bid and the Nikkei has been selling off with support now at the Ichimoku Cloud, which it closed above yesterday.
On back of oil and macro, USDCAD printed new 2016 lows at 1.2630 with next support at 1.2560-area – prior break-out level from June 2015 and 76.4% fibo retracement.
This morning we saw German PPI for March disappointing expectations and has sent the EUR on the offer ahead of the ECB interest rate announcement tomorrow. At noon, Draghi will address the markets today, but the big event will be tomorrow’s press conference,. where Draghi is expected to elaborate on the balance sheet measures which the ECB has announced to introduce, expected around June 2016. Ahead of the Draghi speech today, UK employment figures will come out at 1030CET, where the unemployment rate is expected unchanged at 5.1%. From the UK as well, Chancellor Osbourne will testify on the economic costs and benefits of EU membership. Osbourne has already been pretty gloomy about a potential BREXIT and we do not see any changes on this. EURGBP has been offered since printing 2016 highs in early April and is close to the 50-DMA with a down-trend forming. With the ECB most likely being dovish tomorrow, we could see additional downside in the pair (as well as good central bank play in EURSEK, as the Riksbank is expected on the hawkish side tomorrow).
In the US session, Existing Home Sales for March will be released at 16CET. Consensus is for an increase to 5.30M from 5.08M in February. With Pending Home Sales normally leading the Existing Home Sales, we could see a pickup, which should be constructive for risk. S&P500 printed new 2016 highs yesterday and closed above trend resistance projected from the July 2015 highs and next resistance coming in at the Nov 2015 highs. We would stay in the bid in US equities relative to Europe at the moment and see no reason the index not testing higher levels, despite a somewhat mixed earnings season so far. Crude Oil inventories will also attract attention at 1630CET, where expectations are for a slight build.
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