Bundesbank knocks Euro for six, Stocks make new highs

May 14, 2014

Swing when you’re winning seems an apt phrase for us on the Euro this morning after the Bundesbank delivered a dose of hard reality to Euro bulls overnight.

Certainly the data didn’t help the Euro with the ZEW economic sentiment survey in both Germany and the EU zone undershooting expectations but as is the way with this market that means that the ECB’s QE is more likely to come down the pipe a fact supported by Bundesbank comments.

So the Euro is back at 1.37 having traded below it overnight.

On the weekly charts 1.3665/75 remains the key while on the dailies the focus will be on the 200 day moving average which comes in at 1.3616. Any move below here will signal a much deeper retracement.

In terms of other markets overnight data in the US was strong but also disappointing at the same time. The NFIB small business index rose to 95.2 which is the highest level since October 2007 when no one knew that the GFC had started. Retail sales however rose by just 0.1% in April well short of the 0.4% the market was expecting but March was revised higher.

But in this world mixed data is data which supports interest rates low for a long time even if the Fed keeps tapering so both the Dow and S&P made new intraday all-time highs. The Dow briefly touched 16,736 before pulling back to 16,715 for a rise of 0.12% while the S&P breached 1900 running up to 1902 before pulling back to close at 1,897 largely unchanged. The Nasdaq fell 0.33% to 4,130.

In Europe the FTSE was up 0.31% to 6,873 – it’s highest level for more than a decade, the DAX rose 0.53% to 9,754 and in PAris the CAC was 0.25% higher at 4,505. In Milan stocks fell 1.11% while in Spain stocks rose 0.19%.

On Australian markets overnight there was little move at all as a result of the budget which suggests the market doesn’t believe the forecasts, especially the unemployment forecast and the implications for RBA rates. SPI 200 futures are up 5 points to 5489 bid while bonds appear to have gained a little in the 10′s.

On currency markets as noted above the big news is the Bundesbank comments about easing and the subsequent Euro fall below 1.37 – it sits at 1.3702 at the moment. The Pound also pulled back and sits at 1.6823 this morning while the Aussie rallied as the bulls squeezed the bears before coming back to be roughly unchanged at 0.9354.

On Commodity markets Nymex rose 1.35% to $101.95, gold dropped a little to $1,293 oz and copper pulled back from recent highs to $3.13 lb. Corn rose 1.16%, wheat fell 0.78% and soy-beans rose 1.25%.

Yesterday one of the big investment banks suggested selling gold at $1300.

The charts however suggest that the gold price is in a channel and only a break should trigger a trade – unless of course you like to trade the range.

On the data front today there is nothing to be released in Australia but the big number is the German CPI tonight and UK employment numbers along with the BOE inflation report. In the US PPI will be watched closely.

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