Political events under the spotlight

Investors have few pointers to trade off following yesterday’s Bank holiday in the United States.Political events under the spotlightNevertheless, it looks like a risk off play is settling ahead of this weekend’s Italian elections, particularly in Europe.

ECB President Draghi’s speech to the EU parliament provided little catalyst to markets as he didn’t elaborate on his post ECB press conference in February.

The most significant remark was that he advised the G20 to employ “strong verbal discipline” on speaking about currency movements.

Despite the Italian election most risk measures appear to be well behaved, Equity volatility has continued to drop and gold prices have steadied after the recent sharp fall.

Under the spotlight today is a likely gain in the February German ZEW survey.

The money markets are range bound but it has been noteworthy that USD/JPY has struggled to maintain rallies above the 94.00 level, with upward impetus in the currency pair seeming to fade.

Remarks by Japan’s Finance Minister Aso that the administrations were not thinking of changing the central bank law at present or buying foreign bonds helped to weaken USD/JPY.

Though the G20 meeting successfully gave the all clear for additional Yen declines, a lot is in the price in terms of policy outlooks and any further JPY weakness is likely to be much more measured.

The Aussie rose slightly over night following the release of RBA policy minutes in February, emphasising inflationary outlook for the economy would afford options to ease policy further.

Specifically, mining industries and the labour market are the major worries for Australia, in which the restricted growth in commodity prices would weigh heavily on the economy.

The minutes have limited effect on the AUD as the content is largely in line with expectation.

Finally, Sterling hit a seven month low on the Greenback yesterday following comments from Martin Weale that the MPC wanted a weaker pound to boost export demand.

He said the Bank should hold off from counteracting any rise in inflation that is caused by a weakening exchange rate. “To do any different would be to veer towards deflation as a means of restoring equilibrium”.

The Pound fell 0.5% during Monday’s session to reach 1.5438 its lowest level since July2012 and 5% lower than where is started the year.

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