James Knightley, Chief International Economist at ING, suggests that they are expecting to see 1.40 level for EUR/USD at some point of time in 2019.

Key Quotes

“We were talking a very positive EUR/USD story. The combination of “good” dollar weakness (global growth warranting stronger currencies) turning to bad dollar weakness (Trump’s protectionism, Steve Mnuchin’s suggesting a weaker dollar can be a good thing, rising deficits) coupled with a positive euro story – rebounding portfolios into the euro area, FDI flows relating to Brexit (people switching from investing in the UK to the Eurozone) and the 3%+ Eurozone current account balance.”

“Our suggestion that we could see 1.40 at some point in 2019 caused a few awkward squirms, but there was an acceptance that it wasn’t a completely mad call – we were there only 4 years ago. Latam financial institutions were increasingly switching from US to European assets. They were negative on the USD and were fully backing the stronger EUR call and stronger JPY view.”

 

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   •  Weaker Canadian GDP growth numbers provide a boost. 
   •  Gains were further supported by upbeat/inline US data.
   •  A modest USD weakness fails to lift beyond immediate hurdle.

The USD/CAD pair faded a knee-jerk spike and quickly retreated around 30-35 pips from session tops, touched during the early NA session.

The pair rebounded sharply from an intraday low level of 1.2889 and rallied hard in reaction to disappointing Canadian monthly GDP print. This coupled with an unexpected decline in the Canadian Raw Materials Price Index (RMPI) and slightly better-than-expected/in-line US economic releases lifted the pair to the 1.2940 supply zone.

The US Dollar, however, struggled to gain any follow-through traction and prompted some fresh selling near a technically important resistance zone. The negative factor, to some extent, was negated by retracing crude oil prices, which tends to weigh on the commodity-linked currency – Loonie, and helped the pair to hold its neck above the 1.2900 handle, at least for the time being.

Thursday’s economic docket also features the release of Chicago PMI and revised UoM consumer sentiment, which along with the USD/oil price dynamics could help traders grab some short-term opportunities.

Technical levels to watch

The up-move might continue to confront some fresh supply near the 1.2940 region, above which a fresh bout of short-covering could assist the pair back towards reclaiming the key 1.30 psychological mark.

On the flip side, sustained weakness below the 1.2890-85 region might prompt some fresh selling and drag the pair back towards 1.2840-35 intermediate zone en-route the 1.2815-10 strong horizontal support.
 

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The Turkish economy ended 2017 on a strong footing as Q4 GDP growth was 7.3% y/y, above consensus of 6.7%, making Turkey one of the fastest-growing emerging markets last year, points out the research team at Standard Chartered.

Key Quotes

“Full-year growth rose to 7.4%, from 3.1% in 2016. We identify three key drivers behind this improvement:

Countercyclical fiscal policy: the TRY 250bn Credit Guarantee Fund (CGF) that guarantees loans to the private sector fuelled credit growth of c.20%. Fiscal incentives through tax breaks on durable goods and property and higher spending helped boost domestic consumption.
A recovery in tourism: the number of visitors to Turkey rose c.27% to 32mn in 2017, close to the 2014 high of 36mn.
Strong global growth: the broad-based recovery in global growth, with a pick-up in the EU – Turkey’s main trading partner – supported healthy export growth.”

“Notwithstanding this strong performance, we see softer economic activity in 2018 as the business cycle returns to more sustainable growth levels.”

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The US Core Personal Expenditure (PCE) failed to impress the market.
The GBP/USD hovering near daily lows, remains vulnerable to the downside.

The GBP/USD is trading at around 1.4054 virtually unchanged on Thursday so far as US data just released with the Core Personal Expenditure (PCE) year on year for February  matched original estimates and stood at 1.6%. The US Dollar Index is being supported at the $90 mark. 

After finding resistance at 1.4083, the GBP/USD pair´s reaction to the US-data was pretty muted so far as the Cable is trading about 20 pips lower after the macroeconomic news.

Earlier in the European session, the final revision of the UK Gross Domestic Product came in line with expectations at 0.4% quarter on quarter and at 1.4% year on year in the last quarter of 2017. It is worth noting that the Bank of England stays data dependent and “were the UK economy to regain some of its ‘cyclical swagger’ – and the data outperform the broadly low expectations of investors – we would expect sentiment for two BoE rate hikes in 2018 to gain further traction.” according to analysts at ING.

GBP/USD 4-hour chart

Support is seen at the 1.40 last significant swing low, followed by the 1.39 handle while resistance is seen at 1.41 and 1.4150, previous supply/demand levels. 

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   •  USD revives after US data matches/beats expectations but fails to lift the pair. 
   •  Weaker US bond yields offset risk-on mood and keeps exerting pressure.

The USD/JPY pair held on to its weaker tone through the early NA session and had a rather muted reaction to the US economic releases.

The pair struggled to gain any traction and hovered near the lower end of its daily trading range, despite slight better-than-expected US weekly jobless claims and PCE price index. 

This along with other US data, which were mostly in line with consensus estimates provided a minor boost to the US Dollar but failed to attract any strong buying interest around the major. 

Meanwhile, the ongoing retracement in the US Treasury bond yields seems to be the only factor tracked by bears and weighing on the major. 

However, the prevalent risk-on mood, as depicted by strong gains across European equity markets and which tends to weigh on the Japanese Yen’s safe-haven appeal, extended some support and helped the pair to hold its neck around mid-106.00s. 

Today’s US economic docket also features the release of Chicago PMI and Revised UoM Consumer Sentiment, which again would prove to be a non-event but might still be looked upon for some short-term trading impetus.

Technical outlook

Valeria Bednarik, American Chief Analyst at FXStreet writes: “The pair is nearing its daily low of 106.39 with the ongoing slide seen as corrective as long as the mentioned level holds, given that in the 4 hours chart, the 200 SMA offers a short-term support around the level. Technical indicators in the mentioned time frame are retreating strongly from overbought readings, but remain well above their mid-lines, indicating that selling interest is limited. Below the next short-term support at 106.00, however, the risk of a bearish extension increases.”
 

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According to analysts at Nomura, the preliminary March issue of the University of Michigan consumer survey suggests US consumer sentiment remained strong in early March despite widespread news coverage of President Trump’s proposed tariffs and the subsequent market reaction.

Key Quotes

“The consumer sentiment index rose to 102.0 in February, the highest level since 2004, from 99.7 in January. Although there appears to be a gap between elevated consumer confidence and lukewarm personal spending in Q1, we remain optimistic on consumer spending in 2018.”

“The median of one-year inflation expectations jumped to 2.9%, from 2.7%, in the preliminary report. Although a 0.2pp jump is notable, we caution against reading too much into a single observation. It will take more data to detect a change, if any, to an underlying trend, in our view. Medium- to long-term inflation expectations remained stable. Five- to 10-year inflation expectations remained at 2.5%.”

“Chicago PMI: Relevant components of the Empire State and Philly Fed business surveys rose solidly in March. We expect the Chicago PMI to increase a solid 2.6 index points to 64.5 in March. The Empire State and Philly Fed surveys indicate that new orders and shipments rose sharply in March and employment activity remained healthy. These readings appear consistent with continued expansion in industrial activity.”

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Based on the results of eight regional states, German headline inflation increased for the first time since November last year, coming in at 1.6% year-on-year in March, up from 1.4% YoY in February, points out Carsten Brzeski, Chief Economist at ING.

Key Quotes

“According to the harmonised European definition (HICP), the measure more relevant for ECB policy making, headline inflation accelerated to 1.5% YoY, from 1.2% in February.”

“At first glance, stronger German inflation data looks like a welcome argument for ECB hawks as it seems to confirm their view that prices are finally accelerating. However, on second glance German inflation data is actually providing further evidence that even in the cyclically most advanced economy of the Eurozone, a wage-price-spiral is hardly noticeable.”

“In fact, today’s increase in headline inflation was mainly driven by higher food prices and prices for leisure activities and holiday package deals. Core inflation measures, where available, were still lower than January. As the Easter vacation break this year started in March and not in April as last year, this seasonal effect is the main driver behind the stronger annual data. Once again, it’s the Easter bunny effects blurring the German inflation picture.”

“All of this means that the current economic controversies on whether or not the Phillips curve is broken and whether higher wages still lead to higher inflation will not be solved anytime soon.”

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