FTSE flat at 7325
DAX +29 points at 11933
CAC +5 points at 5000
Euro Stoxx +3 points at 3424
Demand in safe heaven assets slightly eased in Asia, after picking up on London terrorist attack and on the run up to the critical US vote on the health-care bill to replace the Obamacare.
Pharma stocks traded under pressure in Asia and are expected to open downbeat in Europe.
The Japanese yen appreciated to its strongest level in 2017 against the US dollar. The USD/JPY extended losses to 110.73 on Wednesday and remained capped below the 111.60 resistance in Tokyo. It is just a matter of time before the pair challenges the mid-term support at 110.55 (50% level on post-Trump, reflation rally). Traders slowly shift their attention toward the 110 mark.
Gold traded at $1251 on the back of risk-off trades and lower US yields. Stronger trend and momentum indicators suggest a further recovery toward $1261, the 200-day moving average.
The US 10-year yields sit on the 2.40% support. The rising demand in Treasuries should continue weighing on yields, as the risk-off sentiment deepens and the Federal Reserve (Fed) hawks loose further ground.
The kiwi traded rangebound as the Reserve Bank of New Zealand (RBNZ) maintained the status quo and announced that the policy would remain accommodative for a considerable period of time.
In the UK, the pound defended its strength following a terrorist attack in London’s Westminster on Wednesday. The GBP/USD saw a solid support at the 50-day moving average (1.2423). Released on Tuesday, the February inflation report confirmed the Bank of England’s (BoE) concerns regarding the rising inflationary pressures. The GBP-bulls remain in charge of the market on the back of the significant hawkish shift in the BoE expectations.
February retail sales data will be announced at 9:30am London time. Sales excluding autos may have grown by 0.3% month-on-month, which would sum up to a yearly expansion of 3.2% from 2.6% according to analyst estimates. A solid read could underpin the GBP-bulls and send the GPB/USD higher toward 1.2565 (minor 76.4% retracement on February – March decline), before attempting to 1.2609, the 200-day moving average. A soft read could trigger a temporary pullback. Support is eyed at 1.2412/1.2408 (100-day moving average, a former resistance turned to support / Fibonacci 50% retracement on February – March decline) and 1.2337 (major 38.2% retracement).
The FTSE 100 (-0.73%) underperformed its European peers on Wednesday. Stronger pound and cheaper oil continued weighing on the appetite; the FTSE-shorts tested the 7300p on the downside, as financials (-1.17%) and technology stocks (-1.29%) appeared among the leading losers. Losses on energy stocks (-0.27%) remained limited after the barrel of WTI tanked to $47.09 on news that the US crude inventories increased by 5 million barrels last week versus 1.9 million expected.
Further appreciation in the pound, softening oil and commodity prices and uncertainties around the US healthcare vote could encourage a deeper pullback to 7275p (50-day moving average). Resistance is eyed at 7360p (200-day moving average).
Across the channel, the EUR/USD retreated below the 1.08 mark following the failure to clear resistance at 1.0820/1.0830 (50% level on post-Trump decline / 2017 resistance). We do not rule out the possibility of a renewed attempt toward the 200-day moving average (1.0853) given that the trend and momentum indicators remain comfortably positive. However, a short-term profit taking could pull the EUR/USD’s price down to 1.0750/1.0700 (minor 23.6% and major 38.2% retracement on the March rise).
The European Central Bank will offer its last TLTRO (Targeted Long-Term Refinancing Rate) today at 11:30am CET. Expectations are very unclear; analysts expect a takeup between 30 to 750 billion euros. Higher the takeup, greater the impact on the monetary base and the euro. A solid TLTRO is a downside risk on the euro's positive trend.