Europe to open higher as UK

20 June, 2016

Europe to open higher as UK

Despite hitting three month lows last week European stocks managed to stage a late recovery at the back end of last week, and though they did finish the week lower, the late momentum gained is set to translate into a strongly positive start to the new week, as we head into the final furlong of what has been a long, negative and divisive EU referendum campaign, where we have also had to deal with the horrific circumstances of the murder of Labour MP Jo Cox.

With the IMF repeating its warnings about the economic consequences of a “Brexit” over the weekendand the polls starting to shift back towards the “Remain” camp the hope is that this week’s campaigning will have a less strident tone to it, though given some of the comments over the weekend that does seem a rather forlorn hope.

The pound also rebounded strongly at the end of last week despite hitting its lowest levels since April, finishing the week higher in line with the shifting polls, though we’re still getting some rather ludicrous predictions of what the pound might do in the event of a “leave” vote, which to some extent has caused some rather extreme positioning, and will likely contribute to a lot more choppiness in the coming days, as this morning’s Asia surge catches an awful lot of people the wrong way round.

The US dollar has had a rather choppy last few days and starts the new week on the back foot after last week’s comment from St. Louis Fed President and FOMC voting member James Bullard that he could only now see one more Fed rate rise between now and the end of 2018.

As one of the more hawkish members of the committee last year, this seems a remarkable about turn for someone who had set the pace regarding last year’s rate rise. It was tantamount to an admission by a senior Fed policymaker that this was likely to be as good as it got for the US economy in the weeks and months ahead, which would appear to suggest that the next rate rise remains some way off.

Last week Fed President Janet Yellen gave the impression of being rather concerned about the recent slowdown in the pace of jobs growth and her discomfort about committing to the next meeting or two about the prospects of a rate rise were in stark contrast to recent comments that a rate rise would probably be appropriate in the coming months. Tomorrow she will be giving testimony to the Senate banking committee and we could well see some extra colour on last weeks Fed meeting, about her caution with respect to the US economy, when she is questioned by US lawmakers.

This week’s economic data is likely to play second fiddle to this week’s UK referendum on EU membership, but we will be getting the latest June manufacturing and services flash PMI data from France and Germany as well as the most recent May public finance numbers from the UK economy which are due tomorrow.

EURUSD – rebounded from trend line support at 1.1100 from the December lows last week which keeps the current uptrend intact. Having pushed back through the 1.1300 level and last week’s high we now looks set for a move towards the range highs near 1.1500.

GBPUSD – having found support at the April lows around 1.4010 last week this remains a key level. While the subsequent rebound has seen us pull back through 1.4330 last week and this morning’s push back above 1.4400 and 1.4500 we could well head towards the 1.4700 level. Below the 1.4000 level argues for a retest of the lows this year at 1.3835.

EURGBP – the inability to close above the 200 week MA last week, despite pushing up to the 0.8000 level keeps the pressure on the downside. The push back below the 0.7930 area keeps the pressure on for a return towards the 0.7760 level.

USDJPY – having broken below the 105.50 area as well as the 200 week MA, the US dollar looks set for a move towards 100.70 and the 2014 lows. We need a recovery through the 105.50 area to help stabilise.


Source link  
Sterling drops below 1.2800

The pound has continued to come under pressure in the past couple of days sinking to new 31 year lows around the 1.2800 level against the US dollar and multi-year lows against the yen and the euro as well...

Services PMI in focus as growth

After several days of decent gains European markets slid back yesterday as concerns about the impact of last month’s Brexit vote might have not only on the UK economy, but also the economy in Europe more broadly saw investors indulge in a spot of profit taking...

Asia markets shrug off

Last week proved to be quite a week for stock markets with the FTSE100 posting its best week since 2011, while the S&P500 also managed to post its best week this year...


Equity markets rebound for a second day

Risk premium continues to unwind on hopes that central banks will adopt accommodative monetary policies amid Brexit uncertainties. Global equity markets rebounded for a second day, led by European markets...

Europe to open lower as UK politics implodes

Despite a late recovery from the lows last week, European markets had already looked as if they would open sharply lower this morning, after US markets rolled over and fell sharply into their close on Friday, with the S&P500 hitting a three month low...

FTSE set to finish the week higher

European markets have plunged today, after UK voters caught complacent markets on the hop by deciding by 51.9 to 48.1 to leave the EU, in the process delivering a devastating verdict on a poisonous Brexit referendum campaign...


EU referendum in the spotlight

Sterling has soared to five-month high at 1.4810 ahead of the EU referendum today. Is the market over optimistic? The rally of risk assets over the past few days has also indicated that the market is trying to price in a remain vote.

Bremain exuberance shows no signs of waning

While the opinion polls continue to remain mixed with respect to the UK referendum, equity markets appear to be sailing on serenely as we lead up to tomorrow’s vote, and we mercifully enter the final day of campaigning...

European stocks to open higher

The atmosphere in the lead up to the referendum is reaching fever pitch. Thursday Brexit news started with the unusually stark letter from Bank of England governor Mark Carney to an MP, defending his right to discuss the topic during Purdah...

  


Share: