Eurozone treasury bond markets were on the rise yesterday as US investors were absent due to Thanksgiving. Yields on French sovereign bonds were dropping (below 3%) in hopes of a partially reasonable budget compromise. Prime Minister Barnier was expected to abandon higher taxes on electricity.
This relief could hold till today. However, the market might be sensitive to political developments. There’s also a focus on France’s rating review by the SP500 agency tonight. It was previously downgraded to AA-/stable in May, and another downgrade is unlikely. But there’s a chance of a negative outlook, which could lead to further declines in the French stock market, including its main index, the CAC40.
Statements by ECB board member, Villeroy, served as short-term support for eurozone bonds. He suggested that the institution should be open to the scale of a rate cut in December. This is somewhat a counterbalance for Schnabel’s recent comments, which have reduced the chances of a stronger move in December. De Guindos and Nagel are expected to weigh in today.
The pace and size of EBC’s rate cuts will ultimately rely on the data. Currently, an increase in the CPI for the eurozone to 2.3% annually is expected. Besides inflation data, the EBC’s survey on consumer expectations is also worth watching. If their expectations decrease, it could strengthen the “doves'” arguments within the European institution.
The upward correction on EUR/USD continues, but the upward movement is heavily restrained by the 1.06 level. However, it’s possible that the upward movement could develop further towards 1.0660, where the next horizontal resistance and falling trend line, running for two months, intersect.
The French index CAC40 has been under pressure for the last two months. After a dynamic rebound due to the crash in August, the market has once again turned defensive. The index has not been able to set a new historical peak, unlike the German DAX, for instance. A regular downward channel on the French benchmark suggests that the quotations are heading towards the summer trough level (7025 points).
Author: Łukasz Zembik, Oanda TMS Brokers.
Source: https://ceo.com.pl/korekta-wzrostowa-na-eur-usd-trwa-obligacje-w-strefie-euro-rosna-68287
