The European majors are rallying higher at the beginning of the week on the back of positive news from the Brexit negotiations and speculation about the ECB considering to normalize policy earlier than anticipated. Analysts at ADS Securities has shared this 20 March Economic Calendar for a better trade!
20 March, ADS Securities – Both currencies were in demand during the first 24 hours of trading but we need to keep in mind that upcoming news and reports could quickly turn the tables.
20 March Economic Calendar – Euro and Pound Outlook
During the day ahead we will focus on the release of the UK inflation figures and the Eurozone ZEW Survey and the price action ahead will depend on the manner the fresh data comes in.
The British Pound will be front and centre this morning in light of the release of the UK inflation report. The Consumer Price Index is the number one concern for the Bank of England as the rallying inflation has forced the British central bank to grow more hawkish and signal 3 rate hikes over the next 3 years.
Today’s report will be important in assessing when the first hike for this year will come and economists are predicting a stronger reading after last month’s negative data. A bullish inflation report today will help the Pound sustain yesterday’s gains and establish a strong footing above the 1.40 mark.
European Market Outlook
Yesterday the European Union and British chief negotiators announced that they have reached an initial agreement on a “large part” of the Brexit transition terms. As a result, Sterling rallied close to 1.41 only to settle 50 pips lower but a robust CPI printing this morning may provide fresh stimulus – the 1.41 mark remains the next target and depending on BoE’s tone of language tomorrow we could see the Pound to 1.42 by the end of the week.
Similar to the Pound, the Euro is trending higher after a Reuters report that the European Central Bank has begun discussing their intended path of upcoming interest rate hikes stoking hope for a move earlier than expected.
However, this speculation comes in contrast to the recent tone of language from Draghi and co. that made clear that they see no changes in policy anytime soon. We believe that investors will realize that the ECB is staying put for a considerable amount of time and Euro’s rally may be short-lived.
After the shared currency rallied 100 pips over the past 24 hours the focus today will be on the release of the ZEW Survey and expectations are set for a lower reading which will put the Euro to the test. Our attention is on the 1.2330 mark and if the Euro stays above this intra-day support level a consolidation near current levels is our base scenario; otherwise, a break below triggered by a soft ZEW report would signal renewed weakness that will extend the slide towards the 1.23 floor.
Equities in Asia are mixed with the Nikkei lower while the Hang Seng is marginally above water. In Europe and the US, investors are looking to take advantage of yesterday’s decline and look for bargains with futures on both sides of the Atlantic pointing towards a bullish opening bell.
Trade war chatter in Buenos Aires hasn’t been as bad an initially feared so equity traders rejoice but our focus needs to be on the short term; Fed’s meeting on Thursday could signal a reversal in stocks if the US central bank signals more rate hikes to be expected.
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This article was provided by analysts of ADS Securities.
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