Range trading was the predominant theme overnight but gains in safe haven assets have been limited by the moderate gains seen in the macro data released at the end of last week. The University of Michigan Consumer Sentiment survey dropped to 74.3 for the month of March (from 75.3 seen previously). In addition to this, Industrial Production was unchanged during the same month (calculated on a monthly basis) and the yearly reading for the Consumer Price Index (CPI) showed a core figure that was slightly lower at 2.2 percent, from the 2.3 percent that was seen in January.
The Friday figures were nothing impressive but it should be remembered that the overall trend for US macro data is still in the upward direction. Some of this was still evident in the University of Michigan survey, which showed gains in the critical employment component, and did still manage to post gains in manufacturing production (which rose 0.3 percent for the month). The key issue here is the timeframe for when analysts will start to expect interest rate increases from the US Federal Reserve but there is nothing in Friday’s data that is suggestive of a change in rate expectations.
The Euro was weaker overnight against most of its major counterparts, and some additional volatility is expected with the release of the latest Eurozone Current Account and Construction Output figures. The Chancellor of Germany (Merkel) released comments suggesting the possibility that there will be a strengthening of the region’s financial fire wall, using a combination of additional bailout funds from a variety of sources. The EUR/USD currently trades at 1.3110-1.3160, while the recent weakness in the USD/JPY continues with prices remaining elevated at 82.90-83.20.
In the UK, FTSE 100 futures are mostly flat, with no major economic releases scheduled today. Corporate earnings will come from Exillon Energy, Quindell, Xaar, and Morson Group. At the end of last week, we saw that the Rightmove Housing Price Index revealed that housing prices in the UK rose 1.6 percent for the month of March (on a monthly basis). The move was positive but much lower than the 4.1 percent increase that was recorded in the previous month. US stock futures are looking similar to what is seen in the UK, with the S&P 500 futures suggestive of an open 3 points higher. Today will see the NAHB Housing Index and corporate releases from Gordman’s Stores, Document Security and Hastings Entertainment.
The EUR/GBP looks to be resuming its longer term downtrend, with prices breaking uptrend line support in the 0.8320 region and the MACD indicator reading now breaking lower into negative territory. The next major level to the downside comes in at 0.8290. Resistance has now moved down to the psychological level at 0.85.
The DAX remains close to longer term highs, with prices seeing little pullback from the 7230 area. The indicator readings are still showing positive momentum and support at 6600 will be very strong given its proximity to longer term moving average levels. Preferred strategy is to buy on dips, for another test of the old highs from the middle of 2011.