Risk-off ahead of ECB rate decision
EUR/GBP => The pair rises above 0.8550
NIO => The stock trades 60% lower this year
S&P500 => The index falls toward 4100
EUR/GBP rise ahead of the ECB
EUR/GBP rose yesterday, snapping a two-day losing run.
The euro was boosted by stronger than expected economic growth in the first three months of the year. Meanwhile, the pound came under pressure after the OECD reported that the UK would see the slowest growth of developed countries, with growth then stalling next year. This will make it difficult for the BoE to continue raising interest rates without putting the UK in recession. Attention now shifts to the ECB rate decision.
The ECB is not expected to hike interest rates but is expected to tee up the market for a rate hike in July, allowing the bond purchase program to end first. A hawkish-sounding ECB could lift the euro.
| EZ GDP Q1 | Actual: 0.6% (0.3%) | Previous: 0.3% |
Where next for EUR/GBP?
EUR/GBP trades over its rising trendline dating back to mid-April and its 20 & 50 sma.
The RSI is over 50 supporting further upside. The price has recently run into resistance just below 0.86. Buyers will need to retake this level to continue the uptrend to 0.8620, the 2022 high. Failure to retake the 0.86 level could see the price test the 20 sma at 0.85, yesterday’s low. A break below here could open the door to 0.8480 and expose the 50 sma at 0.8430.
NIO Q1 earnings preview
Nio is due to release Q1 results today.
The EV maker is expected to post revenue of RMB 9,804 million, up from RMB 7,982 million year on year. Loss per ADS is expected to be narrower at RMB 0.86 from RMD3.14. The focus will be on the speed at which NIO can ramp up production after the COVID lockdowns, with expectations high that delivery numbers will rise rapidly in the second part o the year.
That said, Q2 could still be challenging, but supply chain problems will ease, prices will rise, and new models will come into play. The stock has lost around two-thirds of its value across the year.
S&P500 looks to jobless claims
The S&P500 tumbled in the previous session, closing over 1% lower, as risk aversion dominated trade.
Fears over inflation, tighter monetary policy, and slower global growth dragged stocks lower. The OCED slashed global growth forecasts to 3%, from 4.5% in December.
Today, futures are rising, and risk sentiment remains fragile as the market looks to US jobless claims data in an otherwise quiet US session. Initial claims are expected to rise after falling in the previous week. Higher than expected claims could unnerve the market and hint toward a slowing jobs market, pulling stocks lower.
| US initial jobless claims | Expected: 210k (10k) | Previous: 200k |
Support can be found at 4060 (20 sma) and 3957 (May 26 low).
Resistance for the pair can be seen at 4200 (50 sma) and 4310 (May 5 high).
