Markets Staying in Consolidation as Dollar and Yen Turn Mildly Softer

The financial markets are generally staying in consolidative mode today. Global stocks managed to reverse some of this week’s loss. in the currency markets, Dollar pares back some of recent gains while commodity currencies recover. Though, these moves are generally seen as profit-taking and position adjust ahead of the weekend. There won’t be a turn in the trend until, at least, there is light of plateauing in the coronavirus pandemic.

Technically, short term tops should formed at 1.4689 in USD/CAD and 0.9499 in EUR/GBP. Short term bottom should also be formed at 0.5506 in AUD/USD and 123.94 in GBP/JPY. They likely engage in sideway trading through the early part of next week. Other pairs could also start to display similar developments soon.

In Europe, currently, FTSE is up 1.65%. DAX is up 3.85%. CAC is up 4.70%. German 10-year yield is down -0.107 at -0.299. Earlier in Asia, Japan was on holiday. Hong Kong HSI rose 5.05%. China Shanghai SSE rose 1.61%. Singapore Strait Times rose 4.32%.

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Canada retail sales rose 0.4% in Jan, coronavirus impact to come later

Canada retail sales rose 0.4% to CAD 5.2B in January, slightly above expectation of 0.3% mom. Ex-auto sales, however, dropped -0.1% mom, versus expectation of 0.2% mom. Sales were up in only 4 of 11 subsectors, representing 48% of retail trade.

Statistics Canada also noted: “While the impacts of the coronavirus on the retail trade sector will be more noticeable in subsequent months, respondent comments for February note that business activities have been impacted.”

ECB policymakers push common fiscal responses from governments

ECB Governing Council Member Olli Rehn said that Eurozone is now at a “critical juncture” with the coronavirus pandemic. It is “essential for Eurozone governments to “get their acts together and agree to a coordinated European fiscal response.” “There’s a saying: never waste a crisis. Therefore it’s important that euro area governments agree at this critical moment on some kind of a safe asset that could provide sturdy support for financing,” he added.

Another Governing Council member Pablo Hernandez de Cos also called for a common fiscal response using the European Stability Mechanism, the European Investment Bank, the EU’s common budget or other “risk sharing” tools. He urged, “greater ambition and coordination are not just an option; they are a necessity.”

Italy pushes new EU bonds to fight against coronavirus economic impacts

Italian Economy Minister Roberto Gualtieri urges EU to issue new bonds to help the member states fighting impact of the coronavirus. He told newspaper Il Corriere della Sera, “we should foresee the issue of European securities that can be used by each country under the same conditions and must be related to the fight against coronavirus and its economic consequences.”

“We are facing a symmetrical shock that affects everyone and therefore we need to use the tools we have in an innovative way,” he added.

While he priced ECB’s move, Gualtieri also emphasized that monetary policy alone is not enough. “We must have the courage to put in place a common and coordinated budgetary policy capable of supporting the effort of our health systems,” he said.

RBNZ announces measures for to support financial system functioning

RBNZ announces a package of measures to support financial system functioning during the coronavirus pandemic. A Term Auction Facility is set up to give banks access to term funding, with collateralized loans available out to a term of 12 months. That should alleviate pressures in the funding markets. Other measures include funding in the fx swap markets, re-establishment of a USD swap line, supporting liquidity in the government market, and measures to have a greater control over short-term interest rates.

“The measures we are implementing today provide additional support to domestic financial markets. We will ensure our operations make financial markets operate smoothly,” Assistant Governor Christian Hawkesby said. “We are working in tandem with the banks, the wider financial market community, and the Government.”

GBP/USD Mid-Day Outlook

Daily Pivots: (S1) 1.1395; (P) 1.1594; (R1) 1.1715; More

Intraday bias in GBP/USD remains neutral for consolidation above 1.1409 temporary low. Some more sideway trading could be seen. But upside should be limited by 1.2129 resistance to bring another decline. Break of 1.1409 will resume whole decline from 1.3514. Though, touching of 1.2129 will indicate short term bottoming and bring lengthier consolidations first.

In the bigger picture, down trend from 2.1161 (2007 high) has just resumed. Next medium term target will be 61.8% projection of 1.7190 to 1.1946 from 1.3514 at 1.0273. In any case, outlook will remain bearish as long as 1.3514 resistance holds, in case of strong rebound.

Economic Indicators Update

GMTCcyEventsActualForecastPreviousRevised
07:00EURGermany PPI M/M Feb-0.40%-0.10%0.80%
07:00EURGermany PPI Y/Y Feb-0.10%0.20%0.20%
09:00EUREurozone Current Account (EUR) Jan34.7B30.3B32.6B
09:30GBPConsumer Inflation Expectations3.00%3.10%
09:30GBPPublic Sector Net Borrowing (GBP) Feb-0.4B0.9B-10.5B
12:30CADRetail Sales M/M Jan0.40%0.00%
12:30CADRetail Sales ex Autos M/M Jan-0.10%0.50%
14:00USDExisting Home Sales Feb5.52M5.46M