More troubles Ahead as Eurozone Growth Forecasts Slashed

Global growth concerns send Asian stocks lower. The main Japanese index Nikkei225 shed 2.01 percent to 20,333. Hang Seng reopened after a Lunar New Year break, lost 0.16 percent to 27,946. The Kospi lost 1.2%, and Australian stocks snapped its four-session winning streak with the ASX 200 sliding 21 points or 0.3% to 6071, but despite a lackluster session today it has still been the best weekly performance for the index since November 2016. The 10-year U.S. Treasury yield extended its overnight drop to a one week low of 2.643 percent. Crude oil slipped 0.7 percent to $52.27/barrel, and Brent oil was down 0.6 percent at $61.26 per barrel. The USDollar index looks strong adding 0.11 percent at 96.68.

European Union leaders told Theresa May that the Brexit withdrawal agreement was not open for renegotiation. European stocks rise in early trade on Friday, and the DAX is trading 0.15% higher at 11,039. CAC40 adds 0.34% at 5,002 and in London FTSE100 is at 7,112


On the Lookout:  The European Commission yesterday cut forecasts for growth in the euro area from 1.9% to 1.3%. The real concern here is that yields start touching to 0% area to match what we see in Japanese bonds. That is a sign of real troubles for the Eurozone economy, a point that we are repeating in our previous daily reports. To make things worse, The Bank of England’s growth forecast for 2019 was downgraded significantly to 1.2% from 1.7%, while the estimate for next year was also slashed to 1.5% from 1.7%. The Central Bank sees just one rate hike fully price in over the next three years, forecasting inflation to move below the 2% level in the coming months. The political situation in Europe is getting worse as France recalled its ambassador from Italy on Thursday: two countries that are struggling with economic uncertainty.

Mexico Central Bank at a meeting yesterday left benchmark interest rate unchanged at 8.25%.

In the economic calendar, the Canadian employment and housing starts data, are due at 13:30 GMT. At 18:00 GMT, Baker Hughes US oil rigs count report will be published, which have a significant bearing on oil prices and the Loonie.

Trading Perspective: In forex markets, AUD/USD hit fresh five-week lows at 0.7060 region after The Reserve Bank of Australia made a downward revision to its growth forecasts in its quarterly Statement of Monetary Policy. NZDUSD is also trading lower at 0.6745 after the New Zealand 10-year government bond yield hit a record low.

EURUSD Hourly (H1) Chart

The European Commission’s latest growth forecast cuts yesterday puts pressure in the common currency. Euro is down 0.12 percent against USD to 1.1325 its lowest level since January 25th. The pair will test the 1.13 area sooner or later, and a convincing break can lead prices down to yearly low at 1.1265. On the upside, a break above 1.1390 will give breath to the bulls.

Open interest in EUR futures markets rose for the third consecutive day on Thursday, this time by nearly 7.3K contracts vs. Wednesday’s final 525,799 contracts, according to advanced figures from CME Group. Volume followed suit, up by almost 33K contracts.

GBPUSD trades lower near 1.2940 early Friday before the UK Prime Minister Theresa May reaches Dublin to meet her Irish counterpart and discuss the problematic border plan. The pair gets support at 1.29 region and needs a significant volume to break below.

In GBP futures markets, investors trimmed their open interest positions by just 688 contracts on Thursday from Wednesday’s final 197,020 contracts. On the other hand, the volume reverted the previous drop and went up by more than 45K contracts.

GBPUSD Daily Chart