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Fed turns neutral, safe-haven in demand
Flight to safety drives the global markets, as geopolitical concerns occupy the global headlines with North Korea’s missile tests and growing threat against the US, the US’ strike on Syria and Jean-Luc Mélenchon gaining support in the French election race.

G7 foreign ministers meet in Italy today; Russian sanctions and Syria will be the major talking points.------- European and UK stocks inherited a risk-off market from Asia.

Fresnillo (+1.33%) and Randgold Resources (+1.94%) diverged positively at the open, as gold recovered on risk-off inflows.

CAC 40 traded south in Paris; French banks lead losses.

Société Générale (-1.06%), BNP Paribas (-0.90%), Crédit Agricole (-0.77%)

UK inflation steady at 2.3%y/y

The headline inflation in the UK remained unchanged at 2.3 year-on-year, versus 2.2% expected, the core inflation eased to 1.8% as expected from 2.0% printed a month earlier.

The consumer prices in the UK continue growing faster than the Bank of England’s (BoE) 2% policy target.

The rising inflation has become a major concern in the UK, since the Bank of England (BoE) eased the monetary conditions to support the British economy through the Brexit.

The last MPC meeting witnessed several BoE members’ hawkish shift given the rise in inflationary pressures. Still, the market assesses less than 18% probability for a BoE rate hike by the end of 2017. UK’s sovereign market pricing suggests that the hawks are not ready to take control of the markets at this stage.

Cable extended gains to 1.2445 post-CPI data. The key daily support is seen at 1.2395/1.2400, area including the 100, 50-day moving averages respectively. On the topside, offers are touted pre-1.2500. Boosted by the CPI data, the BoE hawks could encourage an extension toward the 200-day moving average (1.2557).

Mélenchon steps on the gas

Latest polls suggest that Jean-Luc Mélenchon, the far-left candidate, is surprisingly gaining field on the run up to the first round of the French presidential election due on April 23rd. According to one Kantar poll, Mélenchon advanced to the third place, taking lead over Francois Fillon.

Mélenchon proposes quite a radical political program, including 100 billion euros worth of stimulus, besides reducing the working week from 35 to 32 hours, overhauling the EU and stepping out of NATO.

An eventual far-left win is as doubted as far-right Le Pen’s victory.

As a result, the EURUSD remains under a decent selling pressure against the US dollar. The French-German yield spread widens on French election shenanigans.

Political risks could encourage a further slide in EURUSD toward the 1.0500/1.0495 mid-term support zone.

Gold, yen gain on higher risk aversion

The USDJPY failed to extend gains above 111.58 on Monday. The 110.00 mark is back on radar as money flows into the safe haven yen and the downside trend gains momentum. Stops are eyed below the 110 mark. The key mid-term support stands at 109.50 (200-day moving average). On the upside, the minor 23.6% retracement on December – March decline, 112.15, acts as an intermediary resistance before 112.60 (50-day moving average) and the critical 113.30 (major 38.2% retrace).

Gold continues pressuring the 200-dma ($1257) on the upside. A positive break should open the way for a further advance to $1280. A failure to clear the $1260-resistance could encourage a mid-term downside correction toward $1245 / $1235 area (minor 23.6% and major 38.2% retracement on March recovery).

Neutral is the ‘appropriate stance of policy’ says Yellen

The US 10-year yields consolidated below 2.40%, as FOMC Chair Janet Yellen stated that the Federal Reserve’s (Fed) focus shifted from boosting the economy to supporting growth. The ‘appropriate stance of policy is now closer to […] neutral’ said Yellen.

In the dirt of further details regarding the balance sheet reduction plans, the Fed is expected to raise rates two more times this year.

The Dow is called 20 points softer at $20638 at the open.