Despite the additional easing from the ECB in March

Market Movers

In the euro area, we get data for the German economic sentiment indicator ZEW expectations, which we expect to remain at the current low level as indicated by the Sentix investor confidence. Despite the additional easing from the ECB in March, investors seem worried about the economic outlook and whether the central banks have started to lose their power.
In the US, March figures on housing starts and building permits are due for release. We look for the recovery of the US housing market to continue.
In the UK, everything continues to be driven by the upcoming EU in/out referendum. Today Chancellor of the Exchequer, George Osborne, is questioned by the House of Commons Treasury Committee about the cost/benefit of the EU membership ahead of the EU in/out referendum. BoE Governor Carney speaks at the parliament’s Economic Affairs Committee.

Selected Market News

The market reaction to the failed talks between OPEC and non-OPEC countries was relatively modest. Following a brief drop at market opening, Brent crude rose back up to USD43/bl on Monday. This indicates that unless outright production cuts are brought to the table OPEC’s leverage over the oil price is minimal. The strike among oil workers in Kuwait also got some attention in light of this move, but in our opinion this should be viewed as an insignificant temporary disruption. Hence, we still look for the price of Brent crude to average USD46/bl in Q4 16 and USD52/bl in 2017.

Risk sentiment held up relatively well. The US equity market closed higher and this morning Asian stock markets are rising as well. Moreover, in the fixed income market, the German 10Y yield increased 3bp as the market tested the April highs.

Despite the relatively positive risk sentiment, EUR/USD moved higher. However, we still think there may be downside risks to the EUR in the run up to the UK referendum, as investor appetite for the common currency is likely to wane as a Brexit on 23 June would be negative for the euro area and the EUR. Over the weekend, the IMF spring meetings highlighted Brexit as one of the major global risks that could weigh on financial markets.

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