On Friday, UK PPI Input Month on month came out worst then expected at -1.5% against a forecast of -0.9% with output PPI rising 0.7% against 0.4%
GBPUSD started Friday’s session trading at 1.6123 before seeing a sharp drop mid-afternoon to the low of the day at 1.6066. After a brief spell back over 1.61 in afternoon trading the pair fell back again and is currently trading around 1.6060. A close below support at 1.6050 will confirm the drop towards 1.58 but there will be strong support on the way at the 1.60 level.In early morning trade on Friday we saw GBPEUR break the high again to hit the highest level since Nov 2008 at 1.25039 but failed to break through support, closing the day at 1.2469, today markets have opened around 1.2470 and we can expect another attempt at breaking this 1.25 barrier significantly.
Today is the last day that Greece can form a coalition government before being forced to hold another election in June. As mentioned last week, anti-bailout party Syriza are now leading polls and senior ECB officials are now openly discussing a Greek exit from the euro.
Greece also announced a €9.1bn deficit In Q1 2012 versus €7.37bn last year.
Euro finance ministers meet today and will discuss the international bailout for Greece as well as the situation in Spain, where the government last week made a fourth attempt to clean up the country’s banks. Spanish Prime Minister, Mariano Rajoy announced plans to require the country’s banks to set aside an extra €35bn against bad loans made to its collapsing construction sector, on top of the €54bn they have already provisioned this year.
Political unrest has spread to Germany, with Angela Merkel’s party losing the most populous state and showing they are also being hit by the austerity backlash.
The US Producer Price Index was expected to show a flat 0.0% change but data showed a -0.2% decline in the price of finished goods and services. Expectations for next month data is even worse due to the recent slide in oil prices. Preliminary University of Michigan Consumer Sentiment came out at the highest level since 2008 at 77.8 versus an expected 76.2.
EURUSD traded at a high of 1.2956 on Friday but has traded downwards since and is currently trading at a low of 1.2875 morning. With the pair having broken well clear of the resistance at 1.3000 the next key target is the January low of 1.2620, a close below strong support around 1.28 will accelerate the decline.
On Friday, Canadian employment change came out positively showing a 82.3k gain which was way up from an expected forecast of 11.3k.
China eased monetary policy on Saturday when it the reduced banks’ reserve requirements by 50 basis points. This is the third time in six months where the central bank reduces the reserve requirements. The cut is a signal that the government is expecting growth to slow and wants to support and stimulate their economy now, we can expect further measures in the future.
Eurozone Industrial Production figures just released showed a bigger than expected fall in March. The annualized figure of -2.2% was lower than the -1.2% markets were expecting to see.