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    European Session – Dollar stabilizes near 2-week lows; European stocks up sharply on Yellen

    European equities rose sharply on Wednesday with the major indices up over 1.5% after Fed Chair Janet Yellen signalled again yesterday that the Fed was in no rush to raise rates. Yellen’s cautious stance contrasted with those of other Fed officials who last week had increased the possibility of a rate rise as early as April.

    Another Fed official speaking today tried to strike a more balanced tone. Chicago Fed President Charles Evans said in an interview on CNBC that the hurdle for an April hike is “pretty high” but with further improvements in the labor market, a June move is a possibility.

    The dollar index posted a near two-week low of 94.79 but rebounded slightly on a stronger-than-expected gain in non-farm private jobs according to the ADP employment report. Employment according to the ADP survey rose by 200k in March, above estimates of 194k. The ADP data is seen as a good indicator to the official non-farm payrolls numbers, which are due on Friday.

    The greenback advanced to 112.50 yen after the data, having touched a low of 112.01 yen at the start of European trading. The euro held on to most of its gains and was last trading at 1.1328 dollars. The pound was also buoyant and was hovering around 1.44 dollars for much of the European session.

    The euro saw little reaction to data out of the Eurozone today. European survey data showed economic sentiment across the Eurozone declined slightly to 103.0 in March from 103.9 previously, missing estimates that it would stay unchanged. Consumer confidence in the euro area also deteriorated, dropping to -9.7 from -8.8, in line with estimates.

    There were some positive signs of deflationary pressures in the Eurozone abating after German CPI jumped 0.8% month-on-month in March. Annual inflation in Germany beat estimates of 0.1% to rise by 0.3% according to the flash reading. The final reading for February was 0.0%.

    One of the biggest gainers on Wednesday was the New Zealand dollar, which soared by over 1% to reach a 9-month high of 0.6964 versus the US dollar. The Australian dollar also rose sharply, to climb to 0.7697.

    In commodities, oil prices rebounded from Tuesday’s lows and slightly weaker-than-expected inventory data from the US Department of Energy provided additional support to prices in late session. Crude stocks rose by 2.299 million in the week ending March 25, roughly in line with estimates of 3.300 million. But gasoline and distillate stocks both declined during the same period, falling short of estimates. US oil futures were last trading at $39.70 a barrel.

    Gold was unable to hold on to yesterday’s gains though and prices moved lower to $1233.50 an ounce in late European session.

    Looking ahead to tomorrow, the third estimate of UK GDP growth for the fourth quarter will be eyed, along with the flash inflation data for the Eurozone.

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