European markets struggled for direction yesterday, with upward pressure on short term yields serving to act as a modest drag on the markets ability to build solidly on the gains seen on Monday.
There still appears to be an abundance of caution when it comes to driving prices higher, in the wake of the turmoil of last week with the rise in yields also pressuring US markets, which also struggled with the Nasdaq 100 feeling the effects of firmer rates the most.
This weakness doesn’t look set to translate into the European open this morning with the current caution over banks financial stability set to give a topical flavour to today’s publication of the minutes of the recent Bank of England’s Financial Stability meeting which is set to outline a detailed analysis of the recent problems that saw the UK arm of the Silicon Valley Bank taken over by HSBC.
Today gives a key insight into German and French consumer confidence. The last few months have seen German consumer confidence steadily improve from the record lows in October and is expected to do so again albeit very modestly to -30, from -31.5.
On the other hand, France consumer confidence has remained steady over the past few months, around the 80 level, however the recent social unrest over pension reform could be the catalyst to dent that confidence when today’s March numbers are released this morning.
UK mortgage approvals have seen a sharp slowdown in the last few months as higher interest rates and the rising cost of living serves to crimp demand, even as the lead-up to Christmas tends to see a slowdown in demand.
In January mortgage demand fell to its lowest level since 2020 at 39.6k, and today’s February numbers aren’t expected to see a significant pickup with expectations of around 40k.
In January net consumer credit saw a sharp pickup to £1.6bn, after a slowdown at the end of last year that saw consumer borrowing slow to £800m from £1.5bn. This stop start nature of consumer borrowing points to a UK consumer that is very sensitive to the rising cost of living, and while consumer confidence has improved in recent months it remains very fragile.
Today’s consumer credit numbers for February are expected to show a modest slowdown to £1.2bn, with recent trends in retail sales showing that discretionary demand has started to pick up as energy prices have fallen back.
EUR/USD – A strong day yesterday has seen the euro look to head back towards the 1.0900 area which remains a key area given last week’s failure at 1.0930. Feels rangebound with support at the 50-day SMA at 1.0730, and a move through 1.0930 opening up the 1.1000 area.
GBP/USD – Has moved above the 1.2300 area as well as beyond the highs last week, opening up the prospect of a retest of the 1.2450 area. We have support at the 1.2190/00 area, with a move below 1.2170 opens up the potential for a move towards 1.2020.
EUR/GBP – Still has support at the 0.8770/80 area. A break below here opens up the risk of a move towards strong trend line support at 0.8720, from the lows last August. On the upside we have trend line resistance at the 0.8870/80 area.
USD/JPY – Currently running into cloud resistance at 132.00 which could prompt a return to the 130.00 area. A move below 130.00 retargets the 129.30 area. We need to see a move through the 132.00 area to signal a deeper move towards 133.20.
FTSE100 is expected to open unchanged at 7,484.
DAX is expected to open 50 points higher at 15,192.
CAC40 is expected to open 23 points higher at 7,111.
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