Focus this session – across all asset classes – is firmly fixed on the European Central Bank's monetary policy meeting although bank chief Mario Draghi isn't expected to deliver much beyond "dovish rhetorical attempts to weaken the euro", says Peter Garnry, Saxo's head of equity strategy. "I think the biggest potential question in the press conference Q&A could be regarding the corporate sector QE purchasing programme as there are indications the ECB has already been stealthily tapering these," he adds.
"We're also looking for Draghi's take on Europe's slowing growth momentum. The eurodollar has been persistently strong but if there ever was a time when Draghi could weaken the euro that time could be today," says Ole Hansen, Saxo's head of commodity strategy. "Technically, we're sitting right on top of an important area [see chart below] – the 1.20170 zone, the place from which we bounced the last time and it's also the 32.8% retracement level, so there'll be a lot of focus on EURUSD this afternoon," Hansen says.
Equity markets, meanwhile, are still under pressure despite good earnings , a fact Garnry ascribes to "rising rates, macro weakness and high valuations". One of these corporate earnings reports – Facebook's – was extremely impressive with above-estimate numbers all around. But there are clouds on the horizon as the impact of the EU's new GDPR regulations will start to make itself felt in Q2.
In commodities, crude oil remains buoyant despite a bearish EIA, largely thanks to fading expectations that the US will retain its nuclear deal with Iran. "A bearish EIA inventory report briefly send oil lower yesterday before recovering after President Macron said he believed Trump will withdraw from the Iran nuclear deal" Hansen concludes.
Outrageous Predictions 2023: The War Economy
- The constantly growing global need for energy drives the world's richest to huddle up and launch a R&D project in a size the world hasn't seen since the Manhattan Project gave the US the first atomic bomb.
French President Macron resignsThe political stalemate in France and the rise of Marie Le Pen following the 2022 elections corners President Macron, forcing him to give up on politics and resign from his position. At least for now.
Gold rockets to USD 3,000 as central banks fail on inflation mandateAs markets and central banks realise that the idea that inflation is transitory is wrong, and that prices will remain higher for longer, gold is sent through the roof, hitting a price tag of USD 3,000
EU Army forces EU down path to full unionWith continued challenges in the region and a US military that isn't aggressively enacting its former role as global policeman, the European Union agrees to create its own armed forces, bringing the whole region closer.
A country agrees to ban all meat production by 2030In an effort to become one of the global leaders on the path to net-zero emissions, one country decides to not only put a heavy tax on meat, but to ban domestic production entirely.
UK holds UnBrexit referendumFollowing a recession and domestic pressure, the United Kingdom is thrown into political turmoil that will end with a vote to wind back Brexit.
Widespread price controls are introduced to cap official inflationHistory tells us that with the war economy comes rationing and price controls. And this time is no different, as policymakers introduce strict price controls that lead to a range of unintended consequences.
OPEC+ & Chindia walk out of the IMF, agree to trade with new reserve assetSanctions against Russia have caused widespread turmoil due to US Dollar moves in countries across the globe that don't consider the US an ally. To relieve themselves from this, they leave the IMF and create a new reserve asset.
USDJPY fixed to the USD at 200 as Japan overhauls financial systemFollowing the challenges that faced the Japanese Yen in 2022, the Bank of Japan attempts to keep the currency from sliding. Unsuccessful on the long-term, Japan will launch a reset of its entire financial system.
Tax haven ban kills private equityWith the war economy comes an increased focus on national interests and sovereign nations' ability to assert themselves. In that regard, the OECD countries turn their attention on tax havens and pull the big guns out, banning them altogether.