Markets rebound, euro gains

Monday and Tuesday’s Asian session brought an improvement of a global sentiment. Equities gained and euro recovered somewhat against the dollar and the Swiss franc. There were, however, no key drivers – bulls took advantage of an empty calendar on Monday to set a tone ahead of the intensive remainder of the week. The moods are still fragile though – only if the week doesn’t bring any additional negative surprises, a room for larger rebound will emerge.

Euro advanced despite a decision from S&P to cut Greek rating to CCC as odds for some kind of restructuring are still material. The EURUSD, after fulfilling a H&S pattern took advantage of a support zone at 1,43-1,4350 and climbed back to 1,4430. One should, however, notice that a rebound takes a form of a flag and that is usually merely a corrective pattern. Therefore, technically, downside risk prevail in a mid-term. Breaking the limits of the flag (in either direction) will set the short term dynamics on the market.

Chinese CPI in line

The much feared Chinese data didn’t shock investors and that’s one of the reasons markets recovered during the Asian trade. The data wasn’t actually bullish either: the CPI was at 5,5% (5,4-5,5% was expected) and the PPI remained at 6,8% (and was expected to moderate to 6,6%) so the inflationary pressure is still there in the Chinese economy and risk of further tightening isn’t reduced.

Events to watch – US data, CPI in UK, Bernanke  

The key figure for today is the retail sales data in US (8.30 ET, 14.30 CET, consensus -0,4% m/m, +0,3% m/m for the core). So far the slowdown wasn’t related with personal spending so any negative surprise here would be truly bad. Along the sales data the PPI will be released (consensus +0,1% m/m for the headline and +0,2% m/m for the core) and the data will be followed by a speech from Ben Bernanke (2.30 PM ET, 20.30 CET).

Earlier in the day, the CPI will be released in UK. Market assumes the inflation remained at 4,5% (4.30 ET, 10.30 CET).      

Przemysław Kwiecień PhD, Chief Economist

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