Financial market research and analysis

The UK’s GDP growth fell to 0.3% quarter-on-quarter from 0.7%. The downturn in services growth has been a major focus, reviving concerns that the deterioration in the living standards has just started creeping in following the Brexit vote.

GBPUSD extended gains to 1.2945 before the data and remained well supported after the release given that the slowdown was mostly priced in. As a result, the 1.30 level stands as an appetizing target for the GBP-bulls, especially on the back of an almost sure majority for Tories at the upcoming snap election. Key short-term supports to the current positive trend stand at 1.2725 (minor 23.6% retracement on March – April rise) and 1.2607 (major 38.2% retrace).


FTSE flirted with 7200p, then recovered on weak GDP

The deterioration in the global risk appetite after a renewed Trump disappointment, combined to a stronger pound and cheaper oil justify the solid selling pressures in the FTSE 100 stocks. In addition, the threat from the pharmaceutical giants to leave the UK, unless an extra 20 billion pounds are invested in the NHS each year add to the anxiety.

FTSE 100 broke below the 7222p (50% retracement on the weekly rise) and traded just shy of the 7203p (major 38.2% retracement). The 7200p could act as a solid intraday support, given that the softer-than-expected GDP read somewhat dented the GBP-bulls’ appetite.

Offers are touted above the 200-day moving average (7250p).


Barclays sold on surprise drop in trading revenues

Barclays (-5.30%) traded at the bottom of the FTSE 100, despite announcing solid first quarter results before the open. The 1Q pretax profit beat estimates with GBP1.68bn print versus GBP792 million expected by analysts, the CET1 ratio rose to 12.5% from 12.4%. The surprise drop in fixed-income and equity trading revenues is what caused the sell-off in London.


ECB committed to low rates and QE; no QE exit talks

As suspected, the European Central Bank didn’t show any enthusiasm regarding the outcome of the first round of the French elections as the markets did over the week.

The EURUSD advanced to 1.0932 as President Mario Draghi started speaking at his press conference yesterday. The pair rapidly sold off to 1.0851, as traders understood that there would be no fireworks this week. The ECB reiterated that the policy rates will be maintained at the current, historically low levels for an extended period of time and said to remain committed to the Quantitative Easing (QE) until 2017 and beyond.

Mario Draghi slightly ‘tweaked’ his language as he repeated that the ‘risks surrounding the euro area are still tilted to the downside and relate predominantly to global factors’, but added ‘while moving towards a more balanced configuration’. Of course, it was much less than expected.

Given that the ECB meeting failed to reinforce the post-French election optimism, we could expect a period of consolidation and even correction. If 1.0850 broken, the EURUSD could further fall to 1.0805 (major 38.2% retrace on April rise), which should distinguish between the current positive trend and a mid-term bearish reversal for an eventual retest of the 200-day moving average (1.0777).


Le Pen accused of fraud into the final round of the presidential election

Political games continue at full-speed in France. On today’s headlines, fresh fraud allegations against Marine Le Pen.

Apparently, the slight gain in Le Pen popularity in the latest opinion polls, from 39% to 41% according to Bloomberg’s aggregated poll, was already a too big danger for her opponents.

Still, OpinionWay Poll gave 36% chance for Le Pen win at best, while Harris Poll printed 61% to 39% result in favour of Emmanuel Macron in the final round of the election on May 7th.

Given that Macron-win is already fully priced in, the latest news are expected to have a limited impact on the euro prices this Friday.


Wall Street set to open softer, US GDP in focus

In the US, the durable goods orders grew softer than expected according to March preliminary figures. The core durable orders, excluding transportation, contracted by 0.2% month-on-month.

Weak economic data combined with the halfway completed tax reform announcement from the White House on Wednesday have resulted in a confused US dollar market over the week. In addition, Donald Trump’s U-turn regarding the NAFTA (North American Free Trade Agreement) revived worries regarding the achievability of his campaign promises.

As it stands, Donald Trump failed to deliver his campaign promises in the first 100 days of his presidency. The Trump-reflation rally has majorly profited to the financials which announced solid first quarter results. And although the improvement in financials’ post-Trump results were widely penciled in by analysts, they were still surprised on the upside by 0.85%. In this context, miners amazed the most (+3.11%), as the raw material prices rallied, also on the back of the so-called Trumpflation.

This being said, Trump’s declining credibility could be an issue in the dirt of well-tailored plans on fiscal and trade policies.

The Dow is called 40 points softer at $20’941 at the US open. The bears are expected to defend their position pre-21’000 level.

On the currency markets, the US dollar gained the most against the antipodeans, the Kiwi and the Aussie lost 2.07% and 1.32% respectively. Against the euro (-0.01%), the greenback displayed a flat performance. The leading G10 winner of the week has been the pound. Cable gained 0.89% against the greenback since the weekly opening bell.

The US 10-year yields stagnate around the 2.30% level. The expectations of a June interest rate hike stabilized marginally below 70%.

Due today, the US GDP growth could be revised lower to 1.0%q/q annualized, from 2.1% printed a month earlier. A soft GDP read could weigh on the US dollar before the weekly closing bell, yet the impact is expected to be limited.