EU Morning Report – FOMC policy decision tonight rates expected to remain unchanged!

FOMC policy decision tonight rates expected to remain unchanged!

• Yesterday we saw a stronger dollar and stronger JPY across the board. Initially the USD gained on the back of favorable economic data suggesting the US is experiencing consistent strong growth in output. Industrial production was released and showed a growth of 0.1% for the month and the Empire State Manufacturing Index beat expectations and came out at 22.9. We also had the NAHB housing market Index out yesterday at 15 just missing expectations however indicating stabilization in the sector. As the session went on we saw USD strength and JPY strength as risk aversion gripped the markets. The risk aversion came as markets were disappointed at the lack of willingness of the EU members to present a clear cut plan on how they plan to assist Greece. USDJPY price action was between 90.80 – 89.96.
• In Europe yesterday we had the Eurozone finance ministers meet, the meeting did not give any insight or info as to how the EU will handle the Greek problem and now focus shifts to the wider Econfin group of 27 EU finance ministers. The markets are still awaiting a clear cut proposal or plan from the EU as Greece needs to find over $30 bln to roll over its debt in April. Also high on the agenda was the idea of a European Monetary Fund with mixed opinions on the matter by different officials. Euro zone unemployment declined by 0.2% for the quarter and 2% for the year. EURUSD price action yesterday was between 1.3772 – 1.3640.
• In Japan the 2 day monetary meeting is underway and the market largely expects the BoJ to announce further monetary easing measures to curb deflation and JPY strength.
• In the UK we saw the GBPUSD drop over 190 pips as concerns over a ”hung” parliament intensified. The fear is that a minority government in parliament may make it difficult to pass unpopular legislation such as spending cuts so as to bring in the UK deficit in check. Moody’s also put the UK rating outlook on watch. GBPUSD price action was between 1.5206 – 1.5016.
• Today the market turns its focus to the FOMC rate decision and statement tonight where some market participants expect the Fed to drop the ”extended period’ rhetoric. In Europe we have the Zew economic sentiment reports largely expected to remain unchanged from prior month. We also have a number of housing reports where both housing starts and building permits are expected to show a slight drop in activity.

Currency to watch out for: EURUSD & USDJPY

• § The EURUSD pivot point is at 1.3730 with a preference to enter into short positions at 1.3720
• § The USDJPY pivot point is at 90.50 with a preference to enter short positions at 90.45

Today’s calendar and market movers:

• § Germany ZEW economic sentiment expected to drop to 43.7
• § Euro Zone Inflation for the month expected to rise by 0.3%
• § United States Housing starts expected to fall to 0.57 mln for February
• § FOMC rate decision expected to remain unchanged at 0.25%

Equity Markets:

• US equities closed positive on Friday with the DJIA and the SP500 closing 0.16% and 0.05% respectively.  The European bourses were negative on Friday with the FTSE down -0.57% the DAX and the CAC closing positive at -0.70% and -0.93% respectively. The NIKKEI and the HSI at the time of writing is -0.28% and -0.16% respectively.

Written by Easy-Forex

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