Global Markets:

  • HSBC China Services PMI (MAR): 51.9, Previous: 51.0
  • China Non-manufacturing PMI (MAR): 54.5, Previous: 55.0
  • Australia Trade Balance (FEB): 1,200M, Expected: 850M, Previous: 1,433M
  • Australia Retail Sales (MAR): 0.2 %, Expected: 0.2 %, Previous: 1.2 %
  • Nikkei up 1.40 %; Hang Seng gained 0.50 %
  • Shanghai Composite down 0.15 % on the day, while Australia’s ASX rose 0.15 %
  • Gold at $1292 (+0.10 %), Silver at $19.92 (-0.60 %); Crude Oil at $99.42 (-0.20 %)
  • US 10 year yield at 2.801

FX Flows/Orders:

  • AUD/USD is trading lower after weak Australian Retail Sales and Chinese PMI data
  • Good bids noted around 0.9180, then in large size ahead of the 200 DMA at 0.9139
  • Topside, offers seen pre-0.9250 – 0.9262 now (yesterday’s high) key intraday resistance
  • USD/JPY broke above the 104.00 level in the late Asian session, driven by buying from Japanese names and leveraged accounts
  • Dealers note that local exporters have decent selling interest starting from 104.20, which might slow it down a bit
  • Likely we will see profit-taking selling pre-104.50 ahead of Friday’s NFP release
  • To the downside, bids seen at 103.80/85 and in better size at 103.50 which is key intraday support now; stops resting just beneath
  • EUR/JPY has support at the 21 HMA at 142.81; stops building sub-142.50
  • Large stops reported below 1.6620 in GBP/USD; UK corporate bids at 1.66 and solid demand from mixed names ahead of the 1.6570 level
  • Heavy offers noted 1.6675/85 from Middle East sovereign wealth funds
  • Sizeable stops resting beneath the 0.8250 support in EUR/GBP; break below will trigger momentum selling
  • EUR/USD stops seen through 1.3740; the pair continues to trade with an offered tone; bids in better size starting at 1.3720 down to 1.37

Market Sentiment:

Solid economic data out of the United States led to a rise in US yields, underpinning the strength of the US Dollar and pushing USD/JPY to fresh highs. The S&P 500 index closed 0.30 % higher on the day and Asian stock markets have picked up the positive sentiment with the Nikkei up 1.40 % and Hong Kong’s Hang Seng index gaining 0.50 %.

Looking ahead, we have several Services PMI releases out of the Euro Zone countries and the UK, but the main focus will be of course on the ECB rate decision, followed by the press conference at 13:30 GMT.  Most analysts expect that the ECB will not introduce further easing this week, but the recent data releases are increasing pressure on the central bank to do more to tackle the threat of deflation. An actual rate cut would likely take the EUR/USD to 1.36, while the introduction of a negative deposit rate would trigger an especially large sell-off. On the other side, if the ECB introduces only new liquidity measures, it would likely have a small impact on the Euro. Should Draghi only repeat the neutral comments from the last meeting, we could see a larger short squeeze, but it is very unlikely the bank can afford to do this given recent data.

Traders will also focus on any comments about the current EUR/USD level, as Draghi recently stated that the exchange rate is increasingly relevant in assessment of price stability.

Upcoming Events:

  • 08:13 GMT – Spanish Services PMI (53.5)
  • 08:45 GMT – Italian Services PMI (52.0)
  • 08:50 GMT – French Services PMI (51.4)
  • 08:55 GMT – German Services PMI (54.0)
  • 09:00 GMT – Euro Zone Services PMI (52.4)
  • 09:30 GMT – UK Services PMI (58.1)
  • 10:00 GMT – Euro Zone Retail Sales (-0.6 % MoM, 0.8 % YoY)
  • 12:45 GMT – ECB Interest Rate Decision (0.25 %)
  • 13:30 GMT – ECB Press Conference
  • 13:30 GMT – Canadian Trade Balance (0.20B)
  • 13:30 GMT – US Initial Jobless Claims (317k)
  • 13:30 GMT – US Trade Balance (-38.50B)
  • 14:45 GMT – US Services PMI (55.5)
  • 15:00 GMT – US ISM Non-Manufacturing PMI (53.5)