Merkel dealt her cards: Who will she play with?

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The greenback finished last week on a strong note after the Federal Open Market Committee decision earlier in the week came out more upbeat than expected. Data on Friday turned out mixed as the flash services PMI fell to 55.1 from 56.0 against a predicted 55.8 figure while the flash manufacturing PMI increased to 53.0 from 52.8 against the predicted 53.0 figure. Although no major reports due from the America today, FOMC members Charles L. Evans and Neel Kashkari have their testimonies on tap. 


The common broke a 2-day run with the bulls and trimmed gains on Monday after the German election results prompted some traders to hedge their positions. Chancellor Angela Merkel did win a 4th term in office but she will have to build an uncomfortable coalition to form a government after her conservatives lost support in the face of a surge by the anti-immigration Alternative for Germany (AfD). ECB President Mario Dragi has a speech lined up, so additional volatility could be on the cards.


The British pound paused from its recent run with the bulls as the United Kingdom’s Prime Minister’s speech in Florence did not instil confidence in the market. In addition, the United Kingdom’s CBI industrial order expectations also turned out weaker than predicted as it fell to 7 from 13 thereby reflecting a slower growth instead of holding steady. No major reports due from the UK economy today. 


The franc was unable to establish a specific direction with the currency reacting to currency-specific factors and market sentiment. No reports are due from the Swiss economy today and therefore market sentiment is likely to play a part to determine the currency’s direction.


The Japanese currency ended last week on a less than positive note as the Bank of Japan’s easing bias weighed on the currency. Earlier this morning, the flash manufacturing PMI printed a weaker than predicted result as it rose to 52.6 from 52.2 against the predicted rise to 53.4. The minutes of the BoJ Monetary Policy Meeting to be released later tonight may give the currency a bit of nudge. 


Gold prices dropped on Monday and hovered around one-month lows hit last week, as the U.S. dollar firmed and concerns over the Korean peninsula eased. Spot gold was down 0.4 percent at $1,291.60 per ounce this morning, not far from last week's near one-month low of $1,287.61. Prices of the yellow metal dropped about 1.7 percent last week in their second consecutive weekly decline.


Oil prices was able to keep most of its gains from the previous session as major producers meeting in Vienna said the market was well on its way towards rebalancing.  The Organization of the Petroleum Exporting Countries, Russia and several other producers have cut production by about 1.8 million barrels per day (bpd) since the start of 2017, helping lift oil prices by about 15 percent in the past three months. Kuwaiti Oil Minister Essam al-Marzouq, who chaired Friday’s meeting of the Joint Ministerial Monitoring Committee, said output curbs were helping cut global crude inventories to their five-year average, OPEC’s stated target.

Economic Calendar (all times in GMT)

  • EUR ECB President Speech (13:00)
  • JPY Monetary Policy Meeting Minutes (23:50)

The prices and news mentioned in this outlook are absolutely no guarantee of future market performance and do not represent the view of ICM Capital Limited. Financial markets can move in either direction causing profits to be made or complete losses to be incurred by the trader. Each trader must decide for themselves what their risk appetite is and ensure that correct risk management procedures are in place before placing any trades.

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