Financial market research and analysis

The sharp appreciation in the pound is taking its toll on the UK stock markets. The FTSE started the day downbeat, as financials (-0.99%) led losses after the US banks took a severe hit at New York session.

Energy (-0.38%) and mining stocks (-0.39%) traded softer on further oil and commodity cheapening across the globe.

Airline shares tumbled on the US and UK’s decision to ban electronic devices on direct flights from several Muslim countries, including Lebanon, Turkey and Saudi Arabia.

Turkish Airlines plunged 2.44% in Istanbul, as IAG (-1.25%), Lufthansa (-1.92%) and Air France-KLM (-0.97%) followed the sell-off.


GBPUSD consolidates above 100-day moving average

Cable rallied to 1.2494 on Tuesday, after the February inflation report revealed that the consumer prices rose by 2.3% year-on-year, much higher than 2.1% expected by analysts. This is the first time the UK’s inflation breached the Bank of England’s (BoE) 2% target in three years. Hence, the British policymakers’ worries regarding the rising inflationary pressures are funded and several MPC members could find it necessary to raise interest rates sooner rather than later. The hawkish shift in BoE expectations should keep the GBP-bulls in charge of the market.

Technically, the 50-day moving average is diverging positively from the 100-day moving average (1.2407). Solid support is eyed pre-1.2400 against the greenback. Cable could extend gains toward 1.2565 (minor 76.4% retracement on February – March decline), before the critical 200-day moving average, 1.2610, which has not been tested since June 23rd, the Brexit referendum.


FTSE under the stronger pound’s pressure

 The FTSE 100 broke the 200-day moving average (7365p) on Tuesday and traded down to 7324p at Wednesday open. Pound’s appreciation above the 1.25 against the US dollar could encourage a further decline toward 7280p (50-day moving average).


WTI trades at $48, EIA data in focus

The WTI (-0.35%) consolidates losses near $48 per barrel before the weekly EIA data release due later in the US. Analysts expect the US crude oil inventories increased by 1.9 million barrels last week. Solid inventories report could encourage a sell-off below the $47.50 level (March 13th low), if broken, could pave the way toward $45/barrel for the first time since OPEC committed to cut production in November 2016.


Euro trends higher on increased Macron popularity

Latest French polls showed that Emmanuel Macron is now leading the presidential race, as his probability of winning the first round rose to 26% following the first televised presidential debate. The chances for Le Pen win declined to 24.5%.

The EURUSD tested 1.0820 (Fibonacci 50% retracement on post-Trump decline). More resistance is eyed at 1.0830 (2017 resistance), yet improved trend and momentum indicators suggest a positive breakout to the 200-day moving average, 1.0853. Support is eyed at 1.0700/1.0715 area.

The DAX (-0.81%) and the CAC (-0.83%) refuse to trade on rising hopes that Macron could win the French presidential election.

The euro strength is an important killjoy for the European stock traders.


US stocks tumble, banks race to the bottom on softer Fed expectations

The US dollar consolidated losses against the yen, the euro and the pound, as the US 10-year yields tested the 2.40% on the downside.

The FOMC’s median forecast is now leaning toward two more rate hikes in 2017; in June and in December. Expectations are back to where they were at the beginning of 2017. The US stocks recorded the worse session of 2017 on Tuesday. The S&P500 (-1.24%) and the Dow Jones (-1.14%) sold off, as financials (-2.38%) led losses on softer interest rate expectations.

Bank of America plunged 5.8%, while JP Morgan and Wells Fargo lost 3% in New York. The sharp pullback in banking share prices is due to readjustment of the Federal Reserve (Fed) expectations which were apparently pushed too far away from the reality on the run up to the March Fed meeting. The downside correction is certainly pulling the share prices closer to their fair value. Banking revenues are still expected to rise in 2017 as a result of higher rates, yet certainly less than investors projected prior to the FOMC meeting.

The US stocks are expected to open on a negative note in the US. The Dow Jones is called 40 points softer at $20628 at the open.


Gold on the rise

Gold extended gains past $1245 yesterday for the first time in three weeks. The way is open for a further recovery toward the 200-day moving average, $1261. Dip buyers are touted at $1225/1220 (50-day moving average) as the US yields continue shifting lower.


USDJPY hit target, further fall on horizon

The USDJPY hit the 111.60 target (minor 23.6% retracement on January – February decline). Stronger trend and momentum indicators suggest a further drawback to the mid-term support of 110.55 (Fibonacci 50% level on post-Trump rally), before 110.00 mark comes back to focus.