Markets have been fairly quiet this morning as an element of caution has taken over proceedings. There has been a distinct lack of drivers throughout the session so far. However, the inducement of the caution has been the a mistrust of Putin’s offer for “humanitarian” aid to be moved into Ukraine via a convoy. I would say, quite rightly, the Ukrainian government is suspicious of Putin’s motives and what it might lead to. With a lack of anything else really going on, investors have taken a step back to assess the impact.
The only economic release of any note has been the German ZEW Economic Sentiment survey which was disappointing. There was a limited impact with the DAX barely moved on the news and only a 15 pip (extra) decline on Euro/Dollar.
The German ZEW is just another indicator to add to the list of recent economic disappointments for Germany. With the biggest fall in the survey since the middle of 2012, a lowest level since December 2012 and now reaching 8 consecutive months of decline, there was very little positives to take out of the data. Recent German economic data do not read well for the impending GDP announcement on Thursday.
As we get closer to the US session, there are no large cap corporate announcements to help guide sentiment. We are now around 85% oaf the way through US earnings season, and there are only 16 S&P 500 companies reporting all week. This does not suggest that there will be too much action once the US trading session gets going this afternoon. Traders will be concentrating on geopolitics once more. S&P 500 futures are suggesting around 5 points being added at the open, which is a reasonable gain, but no major move. It will be interesting whether the S&P can hold on to this positive open, as there has begun to be a preference for safer haven plays in the past few minutes.
Further weakness on EUR/USD has been the big move in this morning’s trade. A 505 pip decline on the day has been again mirrored by the gains on USD/CHF. Both moves have been driven by the ZEW disappointment, and both are looking to test key levels. The reaction low from last week’s support at $1.3330 is under threat on EUR/USD, whilst the USD/CHF has rallied and is putting pressure on 0.9100 and the recent peak at 0.9115. Both pairs have been showing potential reversal signals, but the moves today are looking to negate suggestions of a dollar correction.
The gold price is a bit of an anomaly today as usually on days when the dollar has been strong, gold has come under pressure. The $4 gain on gold today perhaps suggests that the market is more cautious on Ukraine than perhaps the stock markets are showing. There is no real buy signal as gold consolidates, but the support holding above $1301.70 and $1305 is encouraging for the bulls.
In many ways, the German ZEW has hardly impacted on the DAX, with the index even beginning to mount a 30 pip rally. However as we approach the US session, the DAX is beginning to struggle. Again this could be due to just a slight increase in market tensions over Russia in the past half hour, but there is a subtle shift back towards safer haven assets under way.