European stocks opened flat. The FTSE showed signs of exhaustion following a four-day rally.
The pound retraced losses against the US dollar and the euro, as the UK’s trade deficit shrank to £9.7 billion in October, from £12.7 billion printed a month earlier. However, Brexit chatter is keeping appetite in the pound limited. From a technical perspective, the golden cross formation on the GBP/USD hourly chart suggests a further extension of losses towards 1.2505 (four-day descending change bottom) before the weekly closing bell.
US stocks extended gains to fresh historical highs. The relative strength index hints at deepening overbought conditions in US stock markets, which could potentially dent the appetite in fresh long positions and suggest that the time for a correction could be approaching.
The S&P 500 is expected to open flat at $2246, as the Dow is seen 15 points higher at $19630 at the US open.
ECB cut monthly purchases, yet expanded the QE duration
The European Central Bank (ECB) announced to decrease its monthly asset purchases from 80 to 60 billion euros beyond March 2017, yet for at least another nine months versus the consensus of six months.
Hawkish in quantity, dovish in duration, the ECB has only tweaked its policy to buy some more time to maintain the monetary conditions sufficiently loose through a potentially turbulent first half of 2017, with German, French and perchance Italian elections on the calendar.
Despite a tighter short-term effect, the ECB’s policy twist may turn out to be significantly looser in terms. History posterior to sub-prime crisis proved a solid central bank tendency to expand the Quantitative Easing (QE), or to postpone QE tapering, as long as there are enough assets to buy in the market.
As a result, the divergence between the ECB and the Federal Reserve (Fed) policy outlook endorses a further depreciation in the euro against the US dollar.
The sustained recovery in the US yield curve is supportive of a slide below 1.0460 (March 2015 low).
The speed of the euro depreciation is contingent on the steepness of the Fed policy.
This report has been prepared by Swissquote Bank Ltd and is solely been published for informational purposes and is not to be construed as a solicitation or an offer to buy or sell any currency or any other financial instrument. Views expressed in this report may be subject to change without prior notice and may differ or be contrary to opinions expressed by Swissquote Bank Ltd personnel at any given time. Swissquote Bank Ltd is under no obligation to update or keep current the information herein, the report should not be regarded by recipients as a substitute for the exercise of their own judgment.
Recommended Content
Editors’ Picks
EUR/USD trades weak below 1.0800 amid Good Friday lull, ahead of US PCE
EUR/USD remains depressed below 1.0800 after soft French inflation data, amid minimal volatility and thin liquidity on Good Friday. The pair keenly awaits the US PCE inflation data and Fed Chair Powell's speech for fresh hints on next week's price action.
GBP/USD holds steady above 1.2600 as markets stay calm on Good Friday
GBP/USD trades sideways above 1.2600 amid a typical Good Friday trading lull. A broadly firmer US Dollar could keep any upside attempts limited in the pair ahead of the US PCE inflation data and Fed Chair Powell's appearance.
Gold reaches to all-time highs near $2,230, US PCE eyed
Gold price appreciates to all-time highs near $2,230 per troy ounce, attempting to continue its winning streak for the fifth successive session on Friday. However, trading volumes are light as market participants are likely observing Good Friday.
Jito price could hit $6 as JTO coils up inside this bullish pattern
Jito (JTO) price has been on an uptrend since forming a local bottom in early January. Since then, JTO has revisited the key swing point formed in early December, suggesting the bulls’ intention to move higher.
Key events in developed markets next week
Next week, the main focus will be inflation and the labour market in the Eurozone. We expect services inflation to be impacted by the easter effect, while the unemployment rate to be unchanged.