The financial markets have been volatile lately due to the economic reports released recently. Data showing an unexpected increase in the public sector borrowing and the BOE minutes of the meeting showing two members voting for further quantitative easing had triggered a sharp dive in the Cable yesterday. For Posen and Miles, a further stimulus was “warranted to reduce the risk that persistently weak growth would damage the future supply capacity of the economy”. Meanwhile, Prime Minister David Cameron’s government is seeking to retain the Britain’s AAA credit rating by erasing the bulk of the deficit by 2017 and taking measures to support growth that don’t require additional borrowing. Today the pair is still stuck between 1.5800 and 1.5900 range.
Japan had published slightly better data, which showed the country logged in a trade surplus of ¥32.9 billion in February. This is the first surplus in five months. However, HSBC flash purchasing managers index, the earliest indicator of China’s industrial activity, showed the overall rate of contraction in China’s manufacturing sector accelerated, with new orders sinking to a four-month low. AUD/USD fell below 1.0400 after the data release. Growth momentum could slow down further amid a combination of sluggish export new orders and softening domestic demand. This calls for further easing steps from the Chinese authorities.
General outlook of the global economy does not seem to be so bright. Only a few economists expect the euro zone’s debt crisis to be resolved anytime soon, given that crucial structural reforms require several years. Portugal’s core public deficit nearly tripled in the first two months of 2012, stoking concerns the country may miss its budget targets and follow Greece in needing more funds.
Today the Asian stock markets are under the pressure. NIKKEI started the day at 10,055.16, previous close was 10,086.49. HANG SENG opened at 20,886.12, previous close was 20,856.63.
EUR/USD is trading at 1.3233 by the time of typing and for today resistances are located at 1.3280 and 1.3336. Support levels are 1.3200 and 1.3146.
GBP/USD is at 1.5869. Resistance levels are located at 1.5900 and 1.5960. Supports are located at 1.5800 and 1.5740.
USD/CHF is trading at 0.9107 by the time of typing and for today resistances are located at 0.9115 and 0.9200. Support levels are 0.9080 and 0.9038.
AUD/USD is trading at 1.0400. Resistances are located at 1.0467 and 1.0514. Support levels are 1.0370 and 1.0303.
The economic calendar is loaded today. Swiss Trade Balance data will be announced at 07:00 GMT. French Flash Manufacturing and Services PMI figures will be released at 08:00 GMT. German Flash Manufacturing and Services PMI numbers will be released at 08:30 GMT. UK Retail Sales report will be released at 09:30 GMT. Statistics Canada will release Core Retail Sales data at 12:30 GMT.