Dollar’s decline accelerates as markets seem to have made up their mind regarding US president Donald Trump’s health care act failure. The dollar index is losing -0.7% at the time of writing, diving through 99.23 near term support and hits as low as 98.90 so far. Risk aversion dominates the markets as investors seriously question Trump’s ability to push through his policies. Nikkei closed down -1.44% at 18985.59. FTSE, DAX and CAC are trading down -0.8%, -0.95% and -0.45% respectively. US futures point to another three-digit fall in DJIA at open. In the currency markets, Yen and European majors are generally higher with Sterling leading the way. Commodity currencies are broadly under pressured.
Labour demands May’s Brexit plan to meet six tests
In UK, Prime Minister Theresa May is going to meet Scotland First Minister Nicola Sturgeon later today. In a speech in Scotland, May said that she would never allow UK to become "looser or weaker" because of Brexit. And she emphasized that when all four nations "works together with determination, we are an unstoppable force." May is expected to discuss with Sturgeon on the topic of another Scottish independence referendum.
May will trigger Article 50 for Brexit negotiation on Wednesday. Ahead of that Labour Party’s Keir Starmer demanded May’s Brexit plan to meet "six tests" to get the party’s support. The tests include "fair migration system for UK business and communities", "retaining strong collaborative relationship with EU", "protecting national security and tackling cross-border crime", "delivering for all nations and regions of the UK", "protecting workers’ rights and employment protections", and "ensuring same benefits currently enjoyed within single market.
German Ifo hit near six year high
Germany Ifo business climate rose to 112.3 in March, up from 111.0 and beat expectation of 111.1. That’s also the highest reading in nearly six years since July 2011. Current assessment gauge rose to 119.3, up from 118.4 and beat expectation of 118.3. Expectations gauge rose to 105.7, up from 104.0 and beat expectation of 104.3. Ifo president Clemens Fuest noted that "the upwards trend in assessments of the current business situation continues unabated." And, "the business outlook for companies also improved again this month. Also "the upswing in the German economy is gaining impetus." Meanwhile, Ifo economist Klaus Wohlrabe also said that "the political uncertainties don’t affect the German economy."
Also from Eurozone, M3 money supply rose 4.7% yoy in February, below expectation of 4.9% yoy.
BoJ opinions: monetary policy based on Japan, not overseas
In Japan, BoJ released summary of opinions from the March 15/16 policy meeting. The document noted that "some market participants argue that the Bank needs to change the monetary policy in response to the rise in the long-term yields overseas." But, majority believed that "monetary policy in Japan should be decided based on Japan’s economic activity and prices". Therefore, "it will be a considerable length of time before the Bank will need to change its monetary policy." At the meeting, BoJ held interest rate unchanged at -0.1%. And under the Yield Curve Control framework, BoJ target to guide 10 year yield at around 0%. The annual target of asset purchase was held at JPY 80T.
Also from Japan, corporate serve price index rose 0.8% yoy versus expectation of 0.5% yoy.
EUR/USD Mid-Day Outlook
Daily Pivots: (S1) 1.0764; (P) 1.0791 (R1) 1.0823; More…..
EUR/USD’s rally accelerates to as high as 1.0895 so far and intraday bias remains on the upside. Current rise is expected to target 100% projection of 1.0339 to 1.0828 from 1.0494 at 1.0983. At this point, we’re still treating rise from 1.0339 as a correction. Hence, we’d expect strong resistance from 1.0983 to limit upside and bring near term reversal. On the downside, break of 1.0760 support will turn bias back to the downside for 1.0494 support. However, firm break of 1.0983 will dampen our view and put focus on 1.1298 key resistance.
In the bigger picture, as long as 1.1298 key resistance holds, whole down trend from 1.6039 (2008 high) is still expected to continue. Break of 1.0339 low will send EUR/USD through parity to 61.8% projection of 1.3993 to 1.0461 from 1.1298 at 0.9115. However, considering bullish convergence condition in weekly MACD, break of 1.1298 will indicate term reversal. this would also be supported by sustained trading above 55 week EMA.
Economic Indicators Update
| GMT | Ccy | Events | Actual | Forecast | Previous | Revised |
|---|---|---|---|---|---|---|
| 23:50 | JPY | BoJ Summary of Opinions at March 15-16 Meeting | ||||
| 23:50 | JPY | Corporate Service Price Y/Y Feb | 0.80% | 0.50% | 0.50% | |
| 8:00 | EUR | Eurozone M3 Y/Y Feb | 4.70% | 4.90% | 4.90% | |
| 8:00 | EUR | German IFO – Business Climate Mar | 112.3 | 111.1 | 111 | |
| 8:00 | EUR | German IFO – Expectations Mar | 105.7 | 104.3 | 104 | |
| 8:00 | EUR | German IFO – Current Assessment Mar | 119.3 | 118.3 | 118.4 |
