Consequently, not only American S&P500 but also European indices are at their January’s (and this year’s) lows. That support was even temporarily breached in Japan, but stocks eventually managed to recover giving European markets some relief today. Although the defence of those supports is still in place, there isn’t much room for optimists. Most of the important releases are already behind us and it is hard to believe that Friday’s CPI data will surprise markets in a positive way. Therefore the only thing which could spark some rebound would be another cut in rates before the official meeting (which is becoming less likely too) or a cut of a whooping 100 bp on the planned meeting. Even that, however, wouldn’t be able to support markets for long.
This has some implications for currency markets as well. The dollar-yen is now around its many years lows. It has already breached the 2005 minimum, but it didn’t managed to go below the one from 1999 (101,22). If this support would be broken, one could expect a sell-out on emerging currencies as well.
Przemysław Kwiecień  |
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