Sterling Still Facing Downside Pressure in Quiet Markets

Markets are generally quiet in Asian session today. Sterling is set to end as the worst performing one for the week. And it’s still facing much downside pressure against Euro, Swiss Franc and Yen. Dollar is following as the second weakest, but the final position is unsure, as Aussie and Loonie are also relatively soft. Nevertheless, Canadian Dollar would have a chance to come back, depending how well the March employment data would be.

Technically, development in Gold before weekly close is worth a watch today. It’s now pressing 1755.29 resistance. Sustained break there will complete a double bottom reversal pattern (1676.65, 1677.69). Stronger rise should then follow to 38.2% retracement of 2075.18 to 1676.65 at 1828.88 first. However, failure to sustain above 1755.29 will retain bearishness, for extending the correction from 2075.18 through 1676.65 at a later stage.

In Asia, Nikkei is up 0.32%. Hong Kong HSI is down -0.83%. China Shanghai SSE is down -0.74%. Singapore Strait Times is down -0.18%. Japan 10-year JGB yield is up 0.0012 at 0.102. Overnight, DOW rose 0.17%. S&P 500 rose 0.42%. NASDAQ rose 1.03%. 10-year yield dropped -0.021 to 1.632.

Fed Powell: Upward price pressure will be temporary

Fed Chair Jerome Powell said in an IMF event, “there will be upward pressure on prices which may be passed along to consumers in the form of price increases”. But he added, “we think that that will be temporary.” He also noted that inflation has been low for more than two decades, and that fed into a psychology of low inflation expectations.

“If inflation were unexpectedly, counter to our expectations, to move meaningfully above levels where we are comfortable – and in particular inflation expectations… if we see them moving persistently and materially above levels we are comfortable with, then we would react to that,” he said.

Fed Daly still see real pockets of weakness and concern

San Francisco President Mary Daly she’s “bullish on the rebound” of the economy. Yet, “we have a long way to go before the job is complete.” She expects a small pick-up in inflation this year. But like many other Fed officials, she expected the pick-up to be transitory.

On monetary policy, she said, “we said substantial further progress, we have to see it, we don’t have to expect it, we have to see it”, before considering stimulus exit. For now, “you still see real pockets of weakness, real pockets of concern.”

Australia AiG services rose to 58.7 in Mar, highest since Jun 2018

Australia Performance of Services Index rose 2.9 pts to 58.7 in March. That’s the highest monthly result since June 2018. All five services sectors indicated “strong rates of recovery”. Four activity indicators – sales, new orders, stocks and deliveries – showed “robust recovery”. However, Employment index indicated “stably or mildly decreasing employment”.

Ai Group Chief Executive, Innes Willox, said: “While areas of vulnerability clearly remain, the strong lift in new orders is an encouraging sign that the services sector as a whole is well positioned to work through the winding down of fiscal stimulus in the next few months.”

Elsewhere

China CPI rose to 0.4% yoy in March, up from -0.2% yoy, above expectation of 0.3% yoy. PPI rose to 4.4% yoy, up from 1.7% yoy, above expectation of 3.5% yoy. PPI reading was the highest since July 2018.

Swiss unemployment rate, Germany industrial production and trade balance, France industrial output, Italy retail sales will be released in European session.

Later in the day, main focus will be on Canada employment data. US will release PPI and wholesale inventories final.

EUR/GBP Daily Outlook

Daily Pivots: (S1) 0.8638; (P) 0.8659; (R1) 0.8697; More…

EUR/GBP’s break of 0.8644 resistance should confirm short term bottoming at 0.8470, on bullish convergence condition in 4 hour MACD. Intraday bias is back on the upside for 38.2% retracement of 0.9291 to 0.8470 at 0.8784. Sustained break there will raise the chance that whole pattern fro 0.9499 has completed with three waves down to 0.8470. Stronger rise would then be seen back to 61.8% retracement at 0.8977 next. Nevertheless, below 0.8580 minor support will bring retest of 0.8470 support instead.

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