Weekly Fundamentals: Pressure Mounting On ECB To Cut Rates

Pressure mounted on the European Central Bank to cut interest rates next week. After discussing an interest-rate cut at last month’s governing council meeting and saying it would watch incoming data very closely, the chances of a cut at next Thursday’s ECB meeting have risen considerably. If it cut, it would be most likely to shave a quarter percentage points off its main refinancing rate, which now stands at 0.75 per cent.

Chancellor George Osborne was given a welcome boost on Thursday after it emerged that the UK economy had grown in the first quarter of the year. Official figures released by the Office for National Statistics showed that output rose by 0.3 percent. Economists had expected a rise of 0.1 percent. This caused a bullish rush on of the Pound to an almost 2 months high.

After last week indifferent closing of the EUR\USD, this week opened with a big fall as negative figures in Germany were released. The pair corrected later on this week around 1.3055 dollars. High expectations of the BOJ on Friday have set the USD\JPY on uncertain terms. It opened high at 99.88 on Monday and dropped 1.5% on Tuesday followed by a slight correction on Wednesday. On Friday the pair was dropped again and it was closed at 98.05 dollars. The AUD\USD started to bounce back after last week’s plunge. The week started in a bearish market turned bullish surprisingly after negative figures of Australian CPI were released on early Wednesday.

The gold markets had a positive session during this week trading hours in continuance of last week session. Gold has gained 10.26% since last Tuesday and looks positive coming next week,it makes us believe that perhaps this market has been sold off far too aggressively, and as a result we do think that this market will more than likely continue higher. This could be more of a grind and less of a straight shot higher, but we still think in the end of the $1550 level will more than likely be tested as resistance.

Major events this week:
· ANZ Business Confidence and American CB Consumer Confidence on Tuesday.
· Brittan Manufacturing PMI, ADP Non-Farm Employment Change in the US and FOMC Statement on Wednesday.
· ECB Press Conference and US Unemployment Claims on Thursday.
· Non-Farm Payrolls Employment Change and Unemployment Rate in the US on Friday.