Sterling Rises in Quiet Markets, Lifted by Buying Against Euro and Franc

Sterling trades generally higher today, with much help from buying in crosses against Euro and Swiss Franc. Australian and New Zealand Dollar are also firmer even though overall market sentiments are mixed. Canadian Dollar, on the other hand, remains a softer one, followed by Euro and then Swiss Franc. Dollar and Yen are mixed for now, awaiting the next move.

Technically, EUR/GBP’s break of 0.8532 support confirms resumption of larger fall from 0.9499. GBP/CHF also resumes the larger rise form 1.1102 through 1.2985 resistance. Next could be GBP/JPY as it’s heading back to 152.52 resistance. Firm break there could come with more broad based buying in the Pound, to push GBP/USD towards 1.4240 high. We’ll see how things play out.

In Europe, currently, FTSE is down -0.38%. DAX is up 0.22%. CAC is up 0.26%. Germany 10-year yield is up 0.0005 at -0.343. Earlier in Asia, Nikkei rose 0.71%. Hong Kong HSI rose 0.01%. China Shanghai SSE rose 0.50%. Singapore Strait Times rose 0.56%. Earlier in Asia, Japan 10- year JGB yield dropped -0.0106 to 0.070.

Ifo: Eurozone economy to contract slightly by -0.4% in Q1, then recovers from Q2 onwards

Germany’s Ifo institute said short term perspectives for Eurozone economy are “highly uncertain”. On the one hand, “the start of the vaccination campaigns gives some reason for optimism”. But on the other hand, “from the beginning of March onwards the pandemic situation has started to worsen almost everywhere with a reappraisal of the containment measures in some countries.”

Overall, Ifo expected that these negatives will have “only a transitory effect of the economy”. Eurozone GDP is expected to contract slightly by -0.4% qoq in Q1, then to recover from Q2 onwards, by 1.5% qoq, and then 2.2% qoq in Q3.

BoJ opinions: Important to firmly continue with pandemic policy responses

In the Summary of Opinions of BoJ’s March 18-19 meeting, it’s said, “for the time being, it is important for the Bank to firmly continue with policy responses to the impact of COVID-19. The Bank should continue to provide support for financing, mainly of firms, and ensure stability in financial markets.”

BoJ’s policy actions decided at the meeting “have ensured the sustainability and nimbleness of policy measures that are necessary to achieve the price stability target”. And, it’s “desirable” for the framework to continue to be the basic guideline for “a few years to come”.

Long-term interest rates were allowed to move in a wider range of plus and minus 0.25%. “This flexibility is desirable since it prevents arbitrageurs and speculators who had lost their profit opportunities from exiting the bond market and helps maintain the price stabilization function in the market.”

The revision on ETF purchases were made “to conduct purchases more effectively”. It’s necessary to “avoid a misunderstanding that the Bank has adopted a less accommodative stance on monetary policy.

The “inflation-overshooting commitment” implies that monetary easing will be continued for a “long period”. As a “deflationary risk” is a “matter of concern at present”, the commitment shows BoJ’s “strong stance that it will not head toward an exit easily.”

Bitcoin jumps as Visa accepts USDC for settlement, a new high ahead

Bitcoin gaps up as the week opened and surges to as high as 57454 so far. it’s lifted by news of Visa Inc’s move to allow use of the cryptocurrency USD Coin (USDC) to settle transactions on its payment network. While the USDC is a stablecoin pegged directly to US Dollar, Visa is on track to acceptance of digital currencies.

“We see increasing demand from consumers across the world to be able to access, hold and use digital currencies and we’re seeing demand from our clients to be able to build products that provide that access for consumers,” Cuy Sheffield, head of crypto at Visa, said.

Bitcoin’s correction from 60726 record could have completed with three waves down to 50320. Further rise is now in favor as long as 54841 support holds, for a new high. But we’d note that loss of upside momentum as seen in 4 hour MACD. Hence, the upside break cold be brief and marginal.

EUR/GBP Mid-Day Outlook

Daily Pivots: (S1) 0.8533; (P) 0.8553; (R1) 0.8570; More…

EUR/GBP’s break of 0.8537 support indicate resumption of decline from 0.9291. Such decline is seen as the third leg of the pattern from 0.9499. Intraday bias is back on the downside for 0.8276 key support level. We’d look for bottoming signal as it approaches this support. Nevertheless, break of 0.8644 resistance is needed to indicate short term bottoming. Otherwise, outlook will remain bearish in case of recovery.

In the bigger picture, we’re seeing the price actions from 0.9499 as developing into a corrective pattern. That is, up trend from 0.6935 (2015 low) would resume at a later stage. This will remain the favored case as long as 0.8276 support holds. However, firm break of 0.8276 support will suggest that rise from 0.6935 has completed and turn medium term outlook bearish.

Economic Indicators Update