Summary:

  • Rout on the European stock markets

  • Stellar performance of Japanese yen

  • Investors await FOMC minutes scheduled for late afternoon

Wednesday was probably the most awaited day of this week by investors due to the vast array of macroeconomic releases scheduled. Preliminary European PMIs that were published in the morning saw another deterioration while the UK inflation report undershoot market expectations. Attention now turns to the weekly DOE inventories data as well as FOMC minutes. On the FX front we have the Japanese yen as a top gainer and the Swedish krone as the biggest laggard. USD also advances significantly. Oil pulls back moderately.

Tailspin across financial markets has increased over the recent hours, and it has not left out virtual currencies as well. Bitcoin is feeling the pain declining in early trading more than 2% as a risk-off mode is prevailing. Looking at the daily chart beneath the price is unlikely to find any support before long if today’s candlestick closes well below $8000.

After a stunning 2017 recovery which also led to EUR appreciation some cool down period was justified. But the PMIs are dropping like stones – 5th in row for manufacturing and 4th for non-manufacturing effectively erasing the whole 2017 gains.

Deutsche Bank keeps trying to reach break even point after few years of consecutive losses. The latest idea of the Bank is to revamp the Deutsche Postbank that is weighing on company’s earnings. Deutsche Bank wants to generate special income through sale of Postbank’s real estate.

British inflation slowed more than forecast in April illustrating that companies still faced hurdles in passing rising production costs on consumers. Inability to lift prices mirrors tight competition as well as a subdued demand. Either way, the BoE officials still foretell a lack of spare capacity may be starting to fuel domestically generated price pressures.

It has passed less than a half of a year since the largest overhaul of the US tax code came into effect, but Donald Trump is already seeking more tax cuts before midterm elections taking place in November. During his address to anti-abortion group in Washington Trump said that his administration will be submitting additional tax cuts sometime prior to November.

The monetary tightening in the US has started long time ago and no one questions it. What investors try to figure out is the pace of this process. Fed informed markets that it will rise rates three times this year but the economic conditions suggest that four hikes may be needed.