All eyes on BoE, UK Inflation Report
Following three days of decent gains in US and EU equities, markets were sent lower yesterday with US indices down around 1% on back of weak earnings from Disney and Macy’s which triggering concern that US consumers holding back on the spending. This made investors flee into safer havens and fixed income yields fell. In Asia, stocks continued lower ahead of key Chinese data in the weekend (Industrial Production and Retail Sales). The Hang Seng (down 0.7%), the fall was led by Consumer Non-Cyclicals and Technology. In Japan, however, the Nikkei got a boost from the weaker JPY overnight, sending Energy and Industrials up. Technically, the Japanese index found support at the daily Ichimoku Cloud and is currently chasing yesterday highs before 17,140-area.
In FX, the USD fell yesterday, sending EURUSD briefly to 1.1450-area, but overnight, we are seeing new signs of USD-appreciation with AUDUSD close to new May lows post the dovish RBA and USDJPY is approaching the 109-level in time of writing. CAD-pairs got a boost on the surprising draw in oil inventories and CAD-pairs are still probing higher in the aftermath.
This morning, stocks in the EU have opened lower flat to lower and will be eyeing the Euro zone Industrial Production at 11CET, where expectations are for a 0.1% monthly increase in March following an 0.8% drop in February. However, there is a risk that we could see this figure falling short of expectations due to recent disappointments in French, German and Italian Industrial Production figures.
From the UK, we have the release of the MPC interest and Asset Purchases decision (both expected unchanged at 0.5%/375B). We don’t expect any significant news in the statement and the BoE is likely to be slightly cautious ahead of the Brexit referendum and not stating anything which could be of political character. The Inflation report will contain the recent economic forecasts and it should be that we will see a downgrade of the forecasts in view of the recent disappointments in UK macro data, with the exception of inflation data. The FTSE is still caught between the 50- and 100-SMAs – perhaps the BoE will be the trigger?
UK100 – BoE to trigger a break-out?
From the US, markets will be looking at the weekly claims and import prices, but just as much on new hints on the monetary policy from three FOMC voters, George, Mester and Rosengren ahead of the June meeting.
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