Europe Seen Lower as Oil and Yen Continue Ascent

European stock markets are expected to open slightly lower on Monday, following some mixed trade in Asia overnight and ahead of a quieter start to the week on the economic data side.

We got the first of a number of key Chinese economic releases this week, overnight, with the latest CPI and PPI inflation data showing inflationary pressures easing again in March, despite food inflation jumping to a six-month high. Still, overall inflationary pressures remain to the downside and with the PPI reading being in negative territory for the 49th consecutive month, the People’s Bank of China may need to step up its easing efforts.

The yen has started the week on the front foot yet again which weighed on Japanese stocks overnight. The gains in the currency came despite a warning over the weekend that intervention in the currency markets is possible and would not constitute a breaking of the G20 agreement on competitive devaluation.

USDJPY Daily

Japan’s Chief Cabinet Secretary Yoshihide Suga claimed that responding to a one-sided move was different to arbitrary intervention, which Prime Minister Shinzo Abe last week claimed should be avoided. Traders have so far shrugged off Suga’s comments though, opting instead to continue to test their resolve and appetite for a potentially controversial devaluation.

Oil has started the week on a positive note, building on last week’s gains as it closes in on the mid-March highs. Last week’s inventory build gave oil a short-term boost but if this move higher is to be sustained we’re going to need to see a bigger commitment to tackling the supply glut that drove oil down to these levels in the first place.

Brent Daily

That could come on Sunday when oil producers meet in Doha to discuss a possible coordinated output freeze, although Iran’s reluctance to do so until production reaches pre-sanction levels could get in the way of a deal being done.

Economic Calendar

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Craig Erlam
Based in London, England, Craig Erlam joined OANDA in 2015 as a Market Analyst. With more than five years' experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while conducting macroeconomic commentary. He has been published by The Financial Times, Reuters, the BBC and The Telegraph, and he also appears regularly as a guest commentator on Bloomberg TV, CNBC, FOX Business and BNN. Craig holds a full membership to the Society of Technical Analysts and he is recognized as a Certified Financial Technician by the International Federation of Technical Analysts.