Financial markets remain in standby until the FED Chair Janet Yellen will hold her speech. Everybody is expecting the Fed to discard the promise to remain “patient” and start raising rates as soon as June, for the first time in a decade. If we were to experience such a scenario, then we should be attentive at the support level of 1.0400 for EURUSD, the 2000 points level for Standard and Poor’s and possibly the 17500 points level for Dow Jones, in the first instance.
On the other side, as Janet Yellen is known for her dovish speeches, rates may wait a little bit more before being modified. Which could be the governors’ reasons? First of all, the weak data reported starting from the beginning of the year. Apart from the labor market, other sectors do not seem to have thawed. PPI and CPI are weak, both retail and wholesales wend and the consumer confidence indicators are falling. Meanwhile, yields on bonds are decreasing considerably among the countries with the strongest economies in the world. Now, only the United States and United Kingdom are presenting better data which weights on monetary policy divergence between UK, US and the rest of the world creating a gap between the USD majorly and the remaining world currencies. There is a strong chance that Janet Yellen will weight things a little bit more before deciding to start the hawkish policy trend. One thing worth mentioning is that back in November 2014, she hinted that the FED might be hiking the rates in April 2015 which majority of the media is ignoring for now. Will it be the case or not? We will see it by the end of the day.
Coming back to the troubled Europe, Germany was on the spot light with its ZEW sentiment. After having conquered the peak area of 12200 points, the German index DAX was quickly put down by the ZEW investor confidence which decreased to 54.8 points. Growth was too fast to have time to consolidate so the smallest earthquake shook the index, which now is struggling to stay above 12000 points. The upward trajectory scenario remains valid in the context of monetary policy while corrections seem to be natural. The risk is that one of these corrections, which could get out of control, may cause a mini market crash or will it?
BOJ meanwhile kind of gave in to the market after its longlasting fight. The first policy meeting this week decided to keep in place its dovish parameters. BOJ finally recognizes that the path to the 2% inflation is hampered by the decreased oil prices while the economy is signaling the recovery from recession. JPY stays weak in against the USD, but it leads the way in relation to the euro. So
The SNB lost the control of the EURCHF currency pair as the price action outlined a descending channel while the USDCHF is currently trading within the boundaries of a sideways movement. Yet to be seen if the central bank is scared of this correction or would choose to stay calm at the press conference tomorrow.
Crude oil stays under pressure as market participants expect the US to report higher inventories than expected. At present, the WTI is pushing the support at 44 dollars while Brent is trying to resist to the 52.50 area.
