Shares in Europe are on course for a positive start with LCG pricing indicating a higher open on Wall Street. The dollar is up slightly after falling yesterday. Gold remains in a tight range while oil is rising for a second day.
Wall Street drops
Shares slumped on Monday in the biggest daily fall since Wall Street struck record highs last month. The US placing steel and aluminium tariffs on Argentina and Brazil caught markets off guard. Traders have had US-China trade tunnel vision. As Americans would say, this came out of left field. The new tariffs in South America are a reminder that with Trump as US President, a phase one trade deal with China doesn’t mean global trade just resets to the old status quo. Traders are buying the dip on Tuesday but there is a risk that markets have been placing too much emphasis on the trade deal, at the expense of ignoring other risks. The growing reticence from central banks, like the RBA overnight, to expand monetary stimulus is being ignored while the trade war takes centre stage.
Euro rebounds from 1.10 level again
A broad decline in the dollar after soft manufacturing data has pushed the euro to 2-week highs. A fourth monthly decline in US manufacturing was particularly disappointing in the wake of more upbeat data in China and parts of Europe. The rally in the euro yesterday was notable from a price action standpoint. It is the third time the 1.10 price handle has held off declines in EURUSD since breaking above it in early October. It’s a further indication that the euro is bottoming out after hitting 2-year lows in September this year.
New ECB President Christine Lagarde might be some of the reason the euro strengthened more than other currencies against the dollar. Traders are reading the tea leaves scattered by Lagarde in her first speech to the European parliament. Lagarde said she would be resolute on the ECB inflation mandate, seemingly indicating no plans to reduce the target rate from just under 2% to 1%. That’s dovish because the ECB isn’t meeting the target, and arguably needs more stimulus to reach it. On the other hand, the acknowledgement of the side-effects from the ECB’s ultra-accommodative policy is a notable shift from her predecessor Mario Draghi – who always minimised the negative effect on banks specifically. That is hawkish and another sign of the internal debate at the ECB about whether policy easing has hit a lower bound.
US opening calls
SP 500 to open 6 points higher at 3119
Dow Jones to open 44 points higher at 27,827
This information has been prepared by London Capital Group Ltd (LCG). The material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. LCG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. Spread betting and CFD trading carry a high level of risk to your capital and can result in losses that exceed your initial deposit. They may not be suitable for everyone, so please ensure that you fully understand the risks involved.
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 price sits at all-time highs above $2,230, US PCE eyed
Gold price hit all-time highs at $2,236 on Thursday to finish Q1 2024 with a bang. Most major world markets, including the US are closed due to Holy Friday, leaving volatility around Gold price highly subdued. US PCE inflation and Powell are awaited.
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.