EURUSD under buying pressure after Putin spoke on live TV

Market Review

Yesterday’s session started off with a slight bullish tone, bid overnight on relatively decent Chinese news, posting a GDP number +7.4% per annum. As the European trading hours started, cable was supported as traders were pricing in a much better than expected unemployment rate. The release showed a decrease of 0.3% to 6.9% which is the largest decrease in years, and the number itself was the best since April 2009 leading to major strength in Sterling and cable just managed to make a new high of the year. In sympathy to this we also saw some strength in the euro, but this was quickly retraced. Yesterday afternoon saw a big miss on the DOE crude oil inventories as the actual build was a lot higher than the analyst consensus had suggested, +10m versus expected +1.3M. The build led to a substantial sell off of about 200 ticks within two hours of the release. No strategy entries were obtained on a relatively slow day.

Today's Fundamental View

This morning the EURUSD has seen substantial buying pressure as Vladimir Putin has been holding his yearly Q&A session live on TV, with a statement saying he does not hope there will be any need of sending troops in to Eastern Ukraine. For Amplify this language is oddly similar to that used ahead of the Crimean invasion, evading the question to some extent keeping all opportunities open. As we see no reason for Russia to intervene, having major troop deployments on the border if you do not intend to utilise them seems like an unnecessary effort. Also with comments later on which have been a bit more aggressive and nationalistic we do not see the upside being supported in risk assets. This afternoon there will be a release of Initial Jobless Claims which is expected at 316k. Last week saw the first post down at the 300k since the financial crisis started, and with an analyst consensus 16k higher we believe there is scope for some more USD strength and a lift in equities should the number come out lower than the expected. As we mentioned last week we believed there was scope for the number to move below 300k and we remain with our view this week. The second piece of data this afternoon worth mentioning is the Philadelphia Fed Manufacturing, though we are more neutral on this release as the comparable New York manufacturing as well as Industrial Production have missed on expectations last reading. The markets are likely to be a bit slower today with many traders having already gone on Easter holiday and after 1500BST we expect volume to be extremely low and we fear a flat line in the market. On a last note, some earnings were disappointing compared to the analyst expectations after close last night, but with most companies having beat on expectations and others showing growth we remain positive in our outlook on the S&P equity index. The EURUSD should be a sell on the back of dollar strength and arguably euro weakness, with crude still being weighed down by yesterday’s number and the trend lower continuing in treasury notes.

Alternative View

Adverse comments from central bankers may affect the markets, as will any developments in Ukraine.