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Markets quieten ahead of FOMC rate decisions.

Morning Brief

The markets are fairly quiet and somewhat boring though this could all change by the end of the week as we will have got through the majority of the earnings season and also the central bank's rate decisions.

Tonight delivers the big FOMC meeting minutes statement and the all-important press conference after. It may be the biggest thing on the economic calendar, but most expectations are around nothing really changing, meaning the risk is that there is a move towards being more hawkish in the future within either the body of text or in Chair Powell’s remarks afterward.

The US 10 year rates are the market's benchmark and we have seen a slight uptick in recent days, though this yield curve is generally trading in between a defined range now. The US dollar has found some overall weakness but refuses to collapse through some key daily swing lows and it is notable now that the USDJPY has rallied for a couple of days now. The 50-day moving average didn’t act as resistance yesterday and anyone shorting the pair on the 19th of April has probably had their stops taken in the overnight trading session today.

When compared to the US10 year yields the USDJPY is tracking Treasury yield for the entire 2021 trading range, so for anyone looking to find the next entry and exit point this may be a great confirmation indicator post the Interest Rate decision tonight. Also, during the Asia-Pac trading session, the NIKKEI 225 added around 0.4% to print above 29,100 following the reports from Japanese retail sales.

This morning at the start of the European session the GfK Consumer Climate Indicator in Germany fell to -8.8 for May of 2021, after rising to -6.1 in the previous data print and worse than market forecasts of -3.5. Expectations of further easing and recovery in consumption have been stifled noticeably due to covid-19 policies and increased restrictions. In the previous month's data which was more optimistic, there were still high hopes that consumer sentiment - also supported by faster vaccinations - could recover more quickly. The severe decline in income prospects, in particular, is contributing to the fact that consumer confidence is suffering again after two increases in a row. The income indicator loses thirteen points and slips to 9.3 points. It has undone the strong gains from the previous month (+15.8 points). In return, the projections for 2022 will be raised significantly. Here real private consumption is expected to rise by 8.5%.

The DAX continues to trade near all-time highs and is currently above the 15315 price level, with prices being supported by relatively good banking data. Deutsche Bank said on Wednesday that its profit in the first quarter of 2021 stood at €1 billion, soaring from €66 million reported a year earlier and hitting a seven-year high.

The EURGBP is caught in a higher time frame downtrend, with the Daily 50 and 200-period exponential moving averages still bearish but with clear higher swing lows and higher swing highs printing in the price action. If the price were to get above Friday's highs, the retest of the 200ema would be likely with the next major resistance coming in at 0.8905 and the swing lows from last autumn. The ActivTrader sentiment indicator has the bears in control with 59% of traders expecting lower prices still.

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