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20/04-12   -   Press releases

Global worries continue to constrict markets

This morning markets continue to be constricted by global growth concerns and persistent worries about the eurozone. In the early hours of the morning, below expectation Japanese and Australian data helped set a negative tone for the Asian session. The release of German Ifo Business Climate at 09.00 should therefore be a big test and it seems markets are waiting for this release before making their move this morning.

The euro continues to trade erratically as rumours and counter rumours hit the news wires. Yesterday saw some alarming price action as rumours of a French debt downgrade circulated. The euro may indeed struggle through the crisis, but many are asking - at what cost? There is a growing backlash against the euro in Germany, especially what many see as the backdoor bailouts of other Eurozone countries.

Yesterday, Gave Kal suggested that recent IMF proposals for Europe which include a Euro bill market, could amount to backdoor federalism (H/T Michael Cartine IFR markets). This ultimately may be the only solution for the Euro, but with 56% of Germans stating that they would prefer a return to the D-Mark, it is unlikely to be the easiest path.

This morning, there is little movement to speak of, with the main mover being the NZD/USD which is down 0.17%. The GBP/USD continues to show some relative strength, up 0.07%, but other than this, its unlikely we will see any movement until the release of German ifo data.

Aside from German business climate data at 09.00, we have UK retail sales at 09.30 and Canadian Core CPI at 13.30. Of more interest will be the IMF and G20 meetings running through the day. Although there is little of substance expected right now, in the current climate, a small, even off the record comment from officials could spark a large movement.

Over the last week, the EUR/USD has expended a lot of energy going nowhere. The 4 hour chart below shows how the euro has tried but failed to break out of its recent trading range with the upside breakout looking like the most likely scenario at the moment.

With big IMF meetings taking place and a whole raft of euro data on Monday, today could be a good time to bet on the breakout on
An IN/OUT trade predicting that the EUR/USD closes outside of either 1.3025 or 1.3215 in 3 days time (Monday close) could return 102% if successful.

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