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Marketreview May 14,2014

May 14, 2014  

OVERVIEW

Euro bulls have got support from Germany. The Wall Street Journal is writing about readiness of German regulator to support stimulating measures of the ECB already next meeting in June. Among other things there will be discussion about negative deposit rates and also about ECB purchase of credit portfolios. Apparently Berlin is tired of low inflation which hasn’t returned to expected in the ECB growth trajectory. A lot will depend now on ECB June forecasts on inflation until 2016. If return of inflation to reference point of the regulator on the level of 2% will be again shifted to the future, then Bundesbank will be able to give a green light to providing liquidity in the EU economy. There is an opinion that Germany’s position is a restraining factor in the ECB policy in spite of its declared independence.

 

Recently Draghi has spoken even about a low probability of approaching European version of QE3. More over in each performance he always made a comment about possibility of undertaking measures from the ECB side only in case of deterioration of current situation with inflation. As a reminder the fall of the figure in March to 0.5% has become a trigger to softening of the monetary policy, as then everyone rushed to ascribe everything to season factors.

 

In April inflation has increased up to 0.7% (in the yearly count of course), though a more significant increase had been expected. So If May inflation remains on current levels, then there will be no forecasted rebound. In such situation the ECB can’t do anything, as lengthy low inflation might lead to disruption of plans on reducing debt load of EU states and will also hit consumer sector.

 

EUR/USD

 

The Euro has got below support. From 1.3690 it has rebounded and at the moment it is fluctuating between those two levels forming upper and lower boundary. It is expected to remain within those 2 levels for some time.

 

 

USD/JPY

 

The pair has recoiled from 102.35. The decline has been quite sloping, but at the end of the chart we can see an abrupt dip. So the bias now is obviously bearish.

 

 

GBPUSD

 

Support of the Pound is broken. Apparently the downward trend is exacerbating. Next support is seen at 1.6763. The trend extends to as low as beneath 1.6700.

 

ECONOMIC CALENDAR

 

06:00    EUR  German CPI (MoM) 

06:45    EUR  French CPI (MoM) 

06:45    EUR  French HICP (MoM) 

07:00    EUR  Spanish CPI (MoM) 

08:30    GBP  Claimant Count Change 

08:30    GBP  Unemployment Rate 

09:00    EUR  Industrial Production (MoM) 

09:30    GBP  BoE Gov Carney Speaks           

09:30    GBP  BoE Inflation Report            

12:30    USD  Core PPI (MoM)      

12:30    USD  PPI (MoM)      

22:30    NZD  Business NZ PMI      

23:50    JPY  GDP (QoQ)        

23:50    JPY  GDP (YoY)      

23:50    JPY  Tertiary Industry Activity Index (MoM)