After the tweet that was sent yesterday by US President Trump, vowing to impede the missile system in Syria that Russia has in place, the tension and fear of ‘cold war’ now between the US and Russia have escalated. On this note, Trump caught most of his aides’ off-guard on Wednesday by his tweet that went public before any agreement was made between the US allies on the matter. Markets have naturally reacted to the recent developments, especially the US dollar and has steadied at lower levels, while the equities have eased due to the fact that the investors are focusing on the possibility of Syria strike.
According to CNN, two US Navy destroyers armed with Tomahawk cruise missiles are in position and ready to be called into action, among other assets including jets and submarines in case that President Trump orders a military strike. This has raised the general cautiousness of investors throughout the capital markets, as all that is left is to see how the situation will evolve.
Looking at the macroeconomic news released yesterday for the Eurozone, there was a larger than expected decline in the industrial production with – 0.8% in respect to the forecasted 0.1%. The decline may be caused due to the poor weather conditions that weighted on the regional economy in Q1 and some indications of strengthening may be seen in Q2 as the weather effect passes, however it is not expected to reach the levels of activity we have witnessed in the second half of 2017. In addition, according to the Chief Economist at ING, Peter Vanden Houte, as the stronger euro may arise and the trade war outing weight on the business confidence, we may expect the Eurozone’s growth pace to fall below 2.0% on an annual basis during the course of 2018.
The ECB minutes from last month’s meeting were most anticipated news regarding the Eurozone yesterday. During the March meeting, we have seen the first major change in language since the introduction of the reinvestment pledge in October 2017, however Draghi’s explanation of the change in language was a rather dovish one and gave less focus on the upbeat developments. Yesterday, the release from the ECB Monetary Policy Meeting Accounts noted that the removal of easing bias should not be misunderstood and there is not enough evidence that the inflation is sustained. Another note was the global economic concern over the risk of trade conflicts and caution was voiced over EUR moves.
EUR/US
The pair is trading round the 1.2320 level ahead of the European session. Yesterday EUR/USD gained a bullish sentiment after falling on Wednesday to the early week ranges. However, the pair is currently leaning towards the downside.
GBP/USD
GBP/USD rose to 1.4247 yesterday and still has room to extend up to 1.4345, seen as highest post-Brexit level. Currently trading at 1.4231, the pair still has chances towards the upside.
USD/JPY
The currency pair is showing an uptrend formation, currently trading round the 107.50 level. There are possibilities for future possible gains.
Gold
Gold started a reversal down yesterday and is currently trading round $1,337.60 level.
ECONOMIC CALENDAR EVENTS FOR APRIL 13th
CNY Trade Balance
EUR German Final CPI m/m
EUR Trade Balance
USD Preliminary UoM Consumer Sentiment
USD JOLTS Job Openings
