Posted on: 23 March 2016, by: Pepperstone Support, category: Market Review
It’s been a busy day in markets following the terrorist attacks in Brussels.
Two explosions at Brussels’ Zaventem airport were first reported around 07:15 GMT. About an hour later, an additional explosion hit Maalbeek metro station, close to the EU institutions.
This comes four days after the capture of Salah Abdeslam, the main suspect in the Paris attacks in November.
Islamic State group later claimed responsibility for the Brussels bombings via its A’maq news agency. It says it targeted an airport and a central metro station and the “attacks resulted in more than 230 dead and wounded”.
Belgium has raised the terror threat to the highest level for the whole country. Public transport networks in Brussels are closed and security has been tightened across Europe.
In FX, the initial reaction focused on selling GBP, presumably betting on an increase in Brexit odds. This GBP selling accelerated as equites sold off. This also coincided with broad risk trading, including selling of USDJPY, commodity and EM currencies.
FX interbank volumes really only spiked on the news of the Brussels Metro explosions, which sent EURUSD from 1.1230 to 1.1190 and GBPUSD from 1.4300 to 1.4260.This kicked off another wave of GBP and risk selling. On this interbank volumes were up 150% vs averages until 08:45 GMT.
The market started to consolidate from there, thanks to improved liquidity condition as well as recovery in equities and oil prices.
UK inflation came in largely inline for the month of February.
Headline CPI stable at 0.3% YoY, undershooting the forecasted 0.4%. Core CPI remains at 1.2% YoY as expected. RPI was also inline at 1.3% YoY.
PPI came in slightly better than expected – headline at -1.1% YoY versus -1.2% forecasted and core at 0.2% YoY versus 0.1% est.
EURUSD also saw some selling in the wake of the Brussels attack while the overall-positive PMI and confidence data were ignored in the London morning. It has retraced part of the selloff in NY.
Markit flash Eurozone composite PMI rose to a 3m high of 53.7 versus 53.0 forecasted. Manufacturing PMI was in-line at 51.4 while Service PMI was better at 54.0 versus 53.3 forecasted.
German IFO business climate bounced back to 106.7 in March, better than the forecasted 106. Both current assessment (113.8 vs 112.7 est) and expectations (110.0 vs 99.5) saw improvements.
German Zew survey came in on the soft side – Current situation at 50.7 vs 53.0 estimate, and expectations at 4.3 vs 5.4 estimate.
US data has obviously taken the back seat today:
FHFA US house price indices rose by 0.5% MoM as expected.
Markit US manufacturing PMI inched up to 51.4 versus 51.9 expected.
Richmond Fed manufacturing index surged from -4 to 22, much better than the forecasted 0. Fwiw, the Fed manufacturing surveys releases so far for March have all seen large upside surprises.