Another day and another NEW low. As I mentioned in my blog yesterday, global stock markets are in a state of meltdown. From Ebola to the EU slowdown and just about any other bad headline, global markets are in turmoil with investors scurrying for the exit door. Perhaps the time has come to clear out the cupboards square things up and wait and see how the next few months play out.
We are nowhere near the light at the end of the tunnel. Ebola is slowly making its way to Europe and the US, the EU remains in turmoil, the Italians are looking for a referendum about whether to stay in the EUR or not and that little problem with ISIS/ISIL is giving world leaders an extra sleepless night.
Equities continued to fall last night with the S&P 500 down 1.65% at the close and the USD staging a late sell-off into the New York close. The S&P 500 has now broken the key 200-day moving average support at 1905 which is a very bearish signal and may fuel further losses in the broader trend. Dallas Federal Reserve president Richard Fisher made remarks on the weekend about a delayed rate hike because the international slowdown is putting some pressure on the USD.
Today sees the announcement of the UK CPI data which is set to guide the BOE and when they are likely to raise rates. The GBPUSD continues to experience weakness having failed to break 1.6117 and trading back towards the key 1.60 handle. This morning’s data will clearly indicate just how much room for manoeuvre the BOE has in regards raising rates. EURGBP jumped above 0.7900 after last night’s crazy moves, but I feel that this move is temporary and a move back below 0.7900 is warranted. A clear break of 0.7925 will dispel that notion for now.
Probably one of the most important releases for today is German ZEW economic sentiment, which is expected to decline from the previous reading of 6.9 to 1.0 (forecast). This could trigger another decline in EURUSD as economic sentiment registers a reading of 1.0, would be the lowest level since September 2013. The EUR could come under serious pressure after the release and might damper hopes of a recovery in the near term. This number will further reiterate the important decisions Pres. Draghi has to make with regards ABS and QE. I think it is high time they open that cheque book and start pumping money back into the system. Sitting on the side-lines and offering crumbs is just not going to hack it anymore. It is high time they get out the big guns. Failure to do this will add immeasurable pressure to an already fragile/near breaking point economy.
EURUSD continues to tread water in the range – pushing sharply higher last night and making the EUR bears nervous. The closed market in the US exacerbated things and from the price action this morning it would appear that the move has to be taken with a pinch of salt. The EURUSD is trading below 1.2700 and as I mentioned above, while we “expect” the ZEW to be nothing short of HORRIBLE, the market might nevertheless SELL the EUR fact.
So for this morning it is the UK CPI vs GER ZEW. Let’s play it out and see who the ultimate winner is.
have a good day ahead and good luck