Market Brief of the Week-European Central Bank in the Spotlight: Mario Sant Singh
'Sell in May and run away?'
(firmenpresse) - SINGAPORE, SINGAPORE -- (Marketwired) -- 04/30/13 -- In his for 29 April, - whose views are widely sought after in the Forex industry, focuses on the Q2 deterioration in confidence with the 10-year U.S. Treasury bill yield reaching its lowest level in 2013, and a possible ECB benchmark interest rate cut on the table.
Key Events to Focus On This Week
Key Events Last Week
Economic Insights
Global Macro Update - We are finally in May
Recent global economic releases and confidence started deteriorating since the beginning of 2Q, putting the concern of "sell in May and run away" on the table. However, pricing has yet to reflect worries since volatility remains low.
To view Figure 1, please visit the following link:
Source: Bloomberg, FXPRIMUS
Thus, major currencies continue lacking correlation against the USD. Their respective fundamentals chose their direction so far:
To view Figure 2, please visit the following link:
Source: Bloomberg, FXPRIMUS
The 10-year U.S. Treasury bill yield reached its lowest level in 2013. Will it be an indicator of "risk off" moving forward?
To view Figure 3, please visit the following link:
Source: Bloomberg, FXPRIMUS
ECB will likely cut interest rate for first time this year
Draghi's previous statement and hope from earlier this year might be taken back.
Mario Draghi made a few statements earlier this year that the economy is expected to recover gradually throughout the year, and a rate cut would be on the table for the time being. The recent financial condition in the Euro Zone might suggest the need for further easing measures.
To view Figure 4, please visit the following link:
Source: Bloomberg, FXPRIMUS
The worst-case scenario: Core economy affected by peripherals, such as Germany and France, slowing down.
The German Manufacturing Purchasing Managers' Index (PMI) and lower Business & Economic Sentiment Index indicated that the economy could possibly enter into a technical recession.
To view Figure 5, please visit the following link:
Source: Bloomberg, FXPRIMUS
Thus, pro-growth partisans could use the core economies' slow-down to undertake less fiscal consolidations and more pro-growth policies. However, the peripherals' yield turns lower sharply.
To view Figure 6, please visit the following link:
Source: Bloomberg, FXPRIMUS
With that said, no action from the ECB this week will spur recent lowering borrowing costs.
ECB event risk will be extremely high this week.
Around two-thirds of economists project a 25 bps cut for the ECB benchmark interest rate. In addition, investors expect the central bank to take measures to boost small- and medium-enterprise (SME) lending since it could be difficult for the rate cut to make much difference. We need to take reference on the UK's Funding for Lending Scheme (FLS).
More credit measures in the UK will target SMEs since M4 growth is still negative, although showing improvement.
To view Figure 7, please visit the following link:
Source: Bloomberg, FXPRIMUS
Last week, banks in the UK were encouraged to lend more by a few new measures:
A rate cut just meets expectation; credit boosting measures are extra bullets.
To view Figure 8, please visit the following link:
Source: Bloomberg
To view Figure 9, please visit the following link:
Source: Bloomberg, FXPRIMUS
U.S. - Ongoing debates on recovery
U.S. 1Q GDP misses forecast with no excuses.
It marked sharp improvement for the 1Q growth pace, but was 0.5% lower than the mean forecast.
To view Figure 10, please visit the following link:
Source: Bloomberg, FXPRIMUS
A brief breakdown of the U.S. 1Q GDP:
Recent fading economic releases such as the Non-Farm Payroll (NFP), Institute for Supply Management (ISM), Consumer Confidence, together with the sequestration kicking in, 2Q growth is expected to be more modest.
This week - ISM, FOMC, and NFP will dominate.
ISM at below 51 is very likely.
U.S. manufacturing activities show less resilience after a three-month boom. For April, the Empire State Manufacturing Index and the Philly Fed survey continue shrinking, which means the ISM index will likely be below the 51 level this month from the latest 51.3.
To view Figure 11, please visit the following link:
Source: Bloomberg, FXPRIMUS
Federal Open Market Committee (FOMC) - Weaker data puts stimulus withdrawal off the table for the time being. Meanwhile, no major policies are expected to change from the previous statement.
The Federal Reserve (Fed) made it clear that the main purposes of Quantitative Easing (QE) target the labor market and price stabilities.
To view Figure 12, please visit the following link:
Source: Bloomberg, FXPRIMUS
NFP could return to a three-digit gain this month, given less initial claims.
To view Figure 13, please visit the following link:
Source: Bloomberg, FXPRIMUS
Worse economic releases, financial conditions deteriorating, and government spending cuts will cap the labor market under pressure.
To view Figure 14, please visit the following link:
Source: Bloomberg, FXPRIMUS
Economic releases and policy directions could bolster the Gold price this week.
To view Figure 15, please visit the following link:
ABOUT MARIO SANT SINGH
is the Director of Training & Education at . He has appeared as a guest expert on CNBC more than 35 times to talk about foreign exchange markets, and is a regular contributor to top investment publications and online portals. Known as a brilliant and intense communicator with a unique ability to 'keep Forex simple' and a mission to help every man-in-the-street to trade profitably and responsibly in the Forex market, more than 20,000 people have attended his Forex trading programs. He is the only Forex trader in Asia invited to train Julius Baer Private Bankers - the third largest Swiss Bank, and ICBC, China's largest commercial bank. Mario is also author of the best-selling book, .
ABOUT FXPRIMUS
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Datum: 30.04.2013 - 10:14 Uhr
Sprache: Deutsch
News-ID 254247
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