U.S. futures are pointing to a slightly higher open on Friday as we await economic data and earnings for the first quarter. It’s already been a lively start to trading in Europe where we got some surprising numbers from the UK and the euro area.
The euro and equity markets have had a strong week so far, thanks mainly to a market-friendly outcome of the French first round presidential election at the weekend. The news caused the single currency to gap higher across the board and although gaps typically get filled quickly this hasn't been the case for the major euro crosses thus far, although the euro/British pound currency pair is taking another bite out of its gap as I write.
The euro/U.S. dollar came under renewed selling pressure on Thursday, with prices descending toward 1.0852 after Mario Draghi swiftly quelled taper tantrum speculations with dovish inflation talks. Although the European Central Bank’s overall tone concerning the Eurozone’s economic recovery was slightly more optimistic, the monetary stance remained firmly dovish.
The euro/Swiss franc (EUR/CHF) currency pair has been a forgotten currency pair, but is the worst days behind it now? The franc has been stubbornly strong against the euro. But with the ECB’s next policy move likely to be to reduce accommodation, the rate differential favours a recovery in EUR/CHF.
Given the extent of the current rally, there is a possibility that the DAX may turn lower again from these levels, for it does look a little overbought. The technical short-term bias would turn bearish upon the breakdown of a key support level such as 11780. In this potential scenario, the DAX may then drop to the old resistance levels such as 11430 or even all the way to 10800 before potentially bouncing back.
The European Central Bank is stealing the spotlight temporarily from the Federal Reserve today as it announces its latest monetary policy decision and hopefully offers some guidance for the rest of the year.
As expected, the European Central Bank has decided to leave its monetary policy unchanged: the main refinancing rate has been kept at zero, deposit facility rate at -0.40% and marginal lending rate at 0.25%. The attention will be on the ECB President Mario Draghi, who will be speaking at the press conference at 13:30 GMT.