Euro reluctant to strengthen with QE programme on the horizon

Fundamental View 

Overnight we saw the release of Chinese GDP growth for 2014. The reading of 7.4% beat the market consensus of 7.3% but at a 24 year low. The majority of market participants have taken this as a positive signs, with no real reaction to the print in any of the bourses. This is because of a number of reasons: firstly we see that the 7% growth now is, in dollar terms, the same as the 10% growth seen in previous years- dollar for dollar the growth is still steady; with the Chinese attempting to secure a soft landing through the cutting of credit lines to investors, this is not only securing steady and sustainable growth but also serving to prevent the housing market from crashing. With Retail sales in line with expectations and Industrial Production beat slightly, solidifying China’s position for the year. We saw the IMF cut growth estimate for china to 6.5% for 2015, along with 3.5% for the global growth outlook. This contraction hit African nations, Brazil and China the worst, with UK and India left uncut and the US raised. This was reflected well in the GBPUSD as the IMF’s decision to leave the UK’s GDP outlook unchanged, with cable trading around the 1.5150 handle.

Today’s View 

This morning saw the ZEW Future Expectations print higher at 48.4 against the expected 40 with current situations also higher at 22.4 against 13. This had a muted effect in the market; the DAX trading flat on its pivot and the EURUSD returning back towards the 1.1600 handle. No pinnacle entries were secured in this morning’s trading with most traders waiting for the ECB on Thursday, the Euro reluctant to strengthen with the QE programme on the horizon. This afternoon’s calendar is relatively quiet with only tier 3 and 4 data due for release. We have US Chain Store Sales, US Redbook and NAHB Housing Market Index for January. The month on month reading is expected at 58 with a previous of 57. Generally we expect another relatively quiet session. All eyes are fixed on Mario Draghi's press conference on Thursday and the Greek election on Sunday. So in the meantime there seems to be a bit of fatigue in markets given the extreme developments of last week. We expect the mild risk on mood to support stocks and keep T-Notes under pressure. There also seems to be some mild US Dollar strength in the system and therefore we look for a short entry for EURUSD and crude oil. Our profit targets are modest to reflect the fact it is likely to be a quiet session.