Market Brief
Uncertainty is rife in the financial markets and volatility was significantly high on Monday. In the U.S, the S&P 500 recorded a loss as it closed at -1.42% at 1853.44 points. The fear of a US recession is now increasingly palpable and markets are pricing this in. This is putting pressure on Treasury yields, indeed 10-Year yields are very close to last year’s low of 1.6357%. Other major American indices, Dow Jones Industrial Average and Nasdaq 100 fell respectively by -1.1% at 16027 points and -1.59% at 3960.671 points.
The sentiment is risk-off at the moment, with gold reaching $1,200 for the first time since June. Gold’s bullish momentum continues yet commodity linked currencies such as the AUD and NZD failed to gain the advantage as outside precious metals and other commodities broadly fell. In particular, WTI crude is now back around below 30 dollars a barrel over continued oversupply concerns. Markets are now fearing that this period of lingering low oil prices could last a long time.
Benoit Coeure from the ECB spoke yesterday confirming that the European institution will decide whether further monetary policy will be applied at its March meeting. Falling inflation expectations would trigger a reaction from the ECB. For the time being, ahead of the Eurogroup meeting to be held this Thursday, Greek bonds are extending their losses over disagreements concerning pension reform. The 10-year is now yielding at 10.18%, up from 61 basis points.
In the Asian session, the Nikkei 225 dropped over 5% as safe haven flows sent the JPY higher despite continued rumours that the Bank of Japan could ease further. The Japanese currency has climbed because of concerns over the European banking sector. The demand for the yen, which serves as haven, has sent the Japan’s 10-Year government bond yield below zero for the first time. The USD/JPY has broken the key psychological support at 115.0 for the first time since November 2014.
In Europe, equity futures are down this morning with the FTSE 100 and the DAX trading in negative territory, respectively down -0.26% and -0.91%.
Today, traders will be watching U.S. Wholesale Inventories, U.K. Trade Balance, German Industrial Production, and Mexican CPI.
Currency Tech
EUR/USD
R 2: 1.1495
R 1: 1.1387
CURRENT: 1.1181
S 1: 1.0711
S 2: 1.0524
GBP/USD
R 2: 1.5242
R 1: 1.4969
CURRENT: 1.4408
S 1: 1.4081
S 2: 1.3657
USD/JPY
R 2: 125.86
R 1: 123.76
CURRENT: 115.19
S 1: 105.23
S 2: 100.78
USD/CHF
R 2: 1.0676
R 1: 1.0328
CURRENT: 0.9858
S 1: 0.9786
S 2: 0.9476