Euro slips on weak Ifo sentiment

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Euro banknotes

Today’s Economic events

  • Germany GDP (Q4) q/q 0.30% vs. 0.30%
  • Germany GDP y/y 2.10% vs. 2.10%
  • German Ifo business climate 105.7 vs. 106.8
  • Germany Ifo current assessment 112.9 vs. 112.0
  • Germany Ifo expectations 98.8 vs. 101.6
  • UK Treasury select committee hearing – Inflation report
  • SNB’s Thomas Jordan speaks
  • ECB’s Nouy Speaks
  • Fed’s Fischer Speaks

Coming up

  • US S&P/CSHPI
  • US Consumer confidence
  • Existing Home sales
  • BoE’s Andy Haldane speaks
  • ECB’s Praet speaks

The Yen was back in the driving seat today following a buildup of risk aversion. The Asian equity markets closed in the red, across the board. The Nikkei225 was down -0.37%, with the Shanghai Composite also closing lower -0.79%. The Yen was broadly stronger in Asian trading especially against the Euro and the British Pound on Brexit concerns, leading a flight to the safe haven. USDJPY continued to fall steadily since the market open today, following yesterday’s short bounce to 113.3Yen. The Greenback touched a daily low near 111.875 before attempting to recoup its losses. At the time of writing, USDJPY is down -0.79% for the day.

The commodity risk currencies continued to push higher with AUDUSD trading near a 7-week high at 0.7247 ahead of the NY trading session. The NZDUSD was, however, flat after prices hit a high above 0.6719 yesterday. A failed attempt near the daily highs of 0.6707 saw the Kiwi easing back lower.

The European trading session was marked by Germany’s GDP data. For the fourth quarter of 2015, Germany’s GDP expanded at a pace of 0.30%, as expected while rising 2.10% on a year over year basis. The upset was however from the Ifo business climate. The German business sentiment slipped for a third consecutive month falling to 105.7, while business expectations fell to 98.8 in February, marking the lowest reading on the index since December 2012. The Euro fell sharply on the data following a failed attempt to regain the 1.105 handle. At the time of writing, EURUSD is down -0.23% for the day.

In the UK, the British Pound continued to stay weak but losses were more contained compared to yesterday’s strong selloff. The UK’s Treasure Select Committee hearing on inflation report was held but there was no significant outcome from it. The Bank of England is expected to release a report on the risks to the UK economy if it were to exit from the EU, which is due to be released on March 8th. GBPUSD was seen strongly consolidating near the 1.41 handle for the most part of the day.

The European markets are also down in the Red today. The German DAX is down -0.84% for the day, while the London FTSE100 is down -0.59% for the day. SNB Chairman Thomas Jordan, speaking at an event today said that the SNB’s monetary policy toolkit had expanded but that it wasn’t unlimited. He said that the Swiss Franc remained significantly overvalued, especially against the Euro and said that effects of monetary policy tend to weaken over time. The Swiss Franc did not react much to his comments and instead gained steadily as USDCHF fell to daily lows of 0.9922.

On the commodity front, Gold prices were seen rallying again today reflecting the risk off sentiment. At the time of writing, Gold was seen trading at $1220 an ounce with gains of 1.15% for the day. Crude Oil prices for April delivery were seen trading subdued, down -0.90% for the day, trading at $$33 a barrel, ahead of the EIA inventory report due later today.

The remainder of the evening will see the US SP/CS HPI, existing home sales data and speeches by various Central bankers.

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John has over 8 years of experience specializing in the currency markets, tracking the macroeconomic and geopolitical developments shaping the financial markets. John applies a mix of fundamental and technical analysis and has a special interest in inter-market analysis and global politics.

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