Important Links

Attention Turns to the European Central Bank

25 April 2017FXEconomics
Picture

With the odds giving Macron a 90% probability of winning round 2 of the French Presidential Election, attention now turns to the ECB meeting on Thursday.

USD & JPY

Strategy: USD Index needs to hold around 99.10 - 24 to stage a rebound.

USD: Trump's "tax plan" to be unveiled this week may only provide broad "parameters" targeting 3% annual US GDP growth. With a border adjustment tax (BAT) to fund proposed tax cuts likely to be missing as part of the plan, this could worsen the budget deficit in the short term and push US bond yields higher. The USD Index has been consolidating this year and needs to hold around 99.10 - 24 in order to stage a rebound.

EURO BLOC

German Ifo for April continues to show strong momentum, printing at 112.9 and higher than the 112.4 expected. Citi analysts note with current assessment near record levels and expectations pointing to further improvement, the German economy continues to strengthen.

Strategy: EUR to underperform especially against the Pounds (GBP).

EUR: With French elections results in line with expectations, gains in EUR post results were short lived. The EUR/USD rallies to test a 109.40 high before retracing, and markets are now discounting a Macron win in round 2. Investors' focus now shifts to the European Central Bank (ECB) meeting on Thursday. A dovish bias could send the EURUSD back down to around Friday's close at 1.0726 and making it difficult to break 1.1125-42. The EUR/GBP may move lower with UK polls increasingly favoring PM May to improve her party's lead in the upcoming June 8th elections. This would likely support further gains in the Pounds (GBP), potentially targeting 0.8017 on the EURGBP cross.

COMMODITY BLOC

Citi analysts forecast that Australia's headline and core inflation for the quarter ending March (to be released Wednesday) to rise 0.7% and 0.5% respectively. This is unlikely to change the outlook for a steady cash rate.

New Zealand's inflation reading for the quarter ending March was the strongest in 5 years. While Citi analysts expect the Reserve Bank of New Zealand to raise its inflation forecasts, it expects the central bank to keep cash rates on hold until Q1'18.

Strategy: AUD capped versus USD and seen underperforming on crosses.

AUD: Following New Zealand's strong inflation reading last week, market consensus and Citi forecasts are positioned for a stronger Inflation reading from Australia on Wednesday. A disappointing reading potentially raises the risk for the AUD as investors may readjust their expectations for a more dovish bias from the Reserve Bank of Australia.

NZD: Flows into NZD have been strong following the above consensus inflation reading last week. The NZD is poised to continuing outperforming the AUD especially if Australia's inflation release on Wednesday disappoints the market.

ASIA EMERGING MARKETS

Singapore's headline and core inflation for March were unchanged at 0.7% and 1.2% respectively, in line with expectations. While imported inflation has picked up, domestic price pressures remain subdued. Hence there is no urgency for the Monetary Authority of Singapore (MAS) to tighten policy yet. However, more positive data surprises could change the MAS' guidance particularly during the release of the Annual Report in July or when GDP forecasts are revised in August.

Our recent research

Yield Curve Flattening Spooks Markets

The spread between 3- and 5-year yields fell to -0.7 bps on Monday, dropping below zero for the first time in more than a decade.

Find out more

Fixed incomeHighlightsEconomics

Time in the Market vs Timing the Market

Given the increase in price volatility, investors may think that market timing during a late-stage bull market may sound like a good idea but history suggests that there is no 'right time' to try timing markets.

Find out more

HighlightsEconomics
Impact of Fed rate hikes on Japanese equity shares - Market Insights by Citibank UK

What's Next for Japanese Stocks?

What could happen to Japanese equities as markets eye an end to US rate hikes?

Find out more

Japan

Take the first steps to your wealth management planning with Citi

Speak to a Relationship Manager
0207 500 1992

Already with Citi? Contact your relationship manager or view product availability on Citi Online

Why choose Citi

A relationship - not just a bank account

A dedicated Relationship Manager giving you access to our internal team of product experts and all our benefits

Access to exclusive Citi products

A range of current and investment products available both on shore and offshore, in the currency of your choice
Multi-currency accounts
Investment products

Global services for a global lifestyle

Our team is here to support you getting started in UK or with International travel and relocation
Moving to and from the UK
Travelling overseas

Offshore investments

We offer a diverse range of banking and investment services, including for those who want access to offshore investments

Find out more

Just moved to the UK?

We can save you time money and hassle. If you are a foreign national in the UK, Citi's International Banking Service can help you manage your money, home and away.

Find out more

Investment products are not insured by any governmental agencies, are not bank deposits, and are neither obligations of, nor guaranteed by, Citigroup, or any of its affiliates, unless otherwise stated. Investment products are subject to investment risks, including possible loss of some or all of the principal amount invested. Past performance is not indicative of future results, investments can go down as well as up.

“Citi analysts” refers to investment professionals within Citi Research (“CR”), Citi Global Markets Inc. (“CGMI”) and voting members of the Citi Global Investment Committee. Citibank N.A. and its affiliates / subsidiaries provide no independent research or analysis in the substance or preparation of this document. The information on this page has been obtained from reports issued by CGMI. Such information is based on sources CGMI believes to be reliable. CGMI, however, does not guarantee its accuracy and it may be incomplete or condensed. All opinions and estimates constitute CGMI’s judgment as of the date of this page and are subject to change without notice. This page is for general information purposes only and is not intended as a recommendation or an offer or solicitation for the purchase or sale of any security or currency. No part of this page may be reproduced in any manner without the written consent of Citibank N.A. Information on this page has been prepared without taking account of the objectives, financial situation, or needs of any particular investor. Any person considering an investment should consider the appropriateness of the investment having regard to their objectives, financial situation, or needs, and should seek independent advice on the suitability or otherwise of a particular investment. Citi Research (CR) is a division of Citigroup Global Markets Inc. (the "Firm"), which does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the Firm may have a conflict of interest that could affect the objectivity of this information. Investors should consider this information as only a single factor in making their investment decision.

Opinions expressed herein may differ from the opinions expressed by other businesses or affiliates of Citigroup, Inc., and are not intended to be a forecast of future events, a guarantee of future results or investment advice, and are subject to change based on market and other conditions.