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Market Review June 3, 2014

June 3, 2014

 

June meeting of the ECB is approaching: on Thursday Draghi will announce the results of press conference. According to Financial Times he will have a lot to talk about. To be more precise one of the main topics on the agenda will be potential reduction of interest rates. It is expected that the key interest rate will be decreased from 0.25% to 0.10%, and deposit rate for the first time in history of world CBs might be altered to a negative figure.

 

A lot will depend on the release of data on inflation in Europe, which is planned for Tuesday. In spite of the fact that statistics is expected on the level of last month (0.7% in yearly count), there is quite high probability that final numbers will be even worse. In such a case there will be talks again about migration of Japanese deflation in the Euro zone, and Draghi will simply have to act.

 

More over the ECB might go even further and to reestablish LTRO program, the point of which is allocation of cheap credits to commercial banks from regulators long term in unlimited volume. Earlier there had been 2 rounds of the program by results of which European banks have attracted around 1 trillion Dollars of credits. But back then the ECB was fighting against high rates on the debt market.

 

If Draghi dares to undertake both reduction of deposit program and launch of LTRO, then it will be an unprecedented stimulating measure. Since the FRS and the BoE are gradually closing their QEs, then such a decision might lead to an enormous dip of the Euro.

 

 TECHNICAL ANALYSIS

EUR/USD


In the midterm the Euro is obviously bearish. As for the near term the Euro currently faces resistance around 1.3590. If it holds it might give some support for the Euro to rebound and stay up for while.

 

USD/JPY

The pair is on the rise. Overall trend keeps looking bullish. Nevertheless the rate has retraced a bit below the resistance line. Most likely this is a correction of the trend, after which the asset might try to test the level again.

GBP/USD

 

The Pound has entered a triangle pattern, which looks quite symmetrical. It suggests some consolidation of the rate after which continuation of prior trend is expected. So the bias is bullish.

  

ECONOMIC CALENDAR

 

01:00    CNY  Chinese Non-Manufacturing PMI 

01:30    AUD  Current Account 

01:30    AUD  Retail Sales (MoM) 

01:45    CNY  Chinese HSBC Manufacturing PMI 

04:30    AUD  Interest Rate Decision    

04:30    AUD  RBA Rate Statement             

06:00    GBP  Nationwide HPI (MoM)    

06:00    GBP  Nationwide HPI (YoY)    

07:00    EUR  Spanish Unemployment Change       

08:30    GBP  Construction PMI      

09:00    EUR  Core CPI (YoY)        

09:00    EUR  CPI (YoY)       

09:00    EUR  Unemployment Rate    

14:00    USD  Factory Orders (MoM)    

23:00    KRW  South Korean CPI (YoY)