FX not moved by bad German data, equities lose ground

Market Review

Last week had quite a few important events coming to the markets, with Mario Draghi on Thursday and the Non-Farm Payrolls on Friday being the two main highlights. Thursday’s event saw a less dovish than expected ECB, as the ABS program would roll over two years rather than the expected one, which alone is positive, but in terms of the potential of quantitative easing the chances of this diminishes significantly as more faith is put on this financial re-start kit. The payroll numbers on Friday beat on the headline with a reading of 248k versus market expectations of 216k. Last months number was also revised upwards, which meant the overall sentiment post the release was positive. The largest reaction could be seen in the currency space, with the EURUSD selling off over 100 pips in the hour following the release alone, whilst equities were relatively muted in terms of reaction to a release of this importance. No strategy entries were obtained during Friday’s session.

Today's Fundamental View

This morning the release of German factory orders at -5.7% has spurred concerns about the largest European economy, which has largely failed to post satisfying economic data sets as of late, and this number is the lowest since March 2009. The currency space has not seen much movement on the back of the release, although the equity sector, which opened much higher, has lost ground. The data calendar for the afternoon is empty, and combined with the NFP number on Friday we are likely to have a ranging session today, on very light volume. The Ukrainian situations continues in the background of the markets, where rebels continue to fight government forces in the Donetsk region. The bond space has been lacklustre this morning, trading in a tight range and is currently unaffected by this morning’s data. The Hong Kong situation is quieting down as a new work week is about to start, although a new generation in China has clearly started their awakening and the situation should continue to be monitored closely over the next few years as the people of tomorrow demand more rights and an elected leadership. Today’s strategy is positive on risk due to Friday’s numbers, although very prudent range targets due to the low volume

Alternative View

Any geo-political risk should be carefully analysed, with continued focus on Ukraine as well as US data being a key catalyst for movement today. Chinese response to protests and escalations needs to be monitored closely.