Markets looks to be making an inauspicious start to the second quarter after a first quarter that ended on a risk averse note, certainly for equity markets and to some degree the Yen. The stand out from Q1 was the euro which suffered its worst quarter on record against the dollar for many reasons that we have been discussing throughout the course of 2015 so far. The decline will be widely welcomed by many parts of the Eurozone and in particular the ECB which had been working hard to try and prevent further deflationary pressures and help peripheral nations boost exports and growth.
We’ve been seeing even before the formal commencement of quantitative easing from the ECB tentative signs economic conditions in the Eurozone were improving with unemployment peaking in the peripheral nations and now the rate of falling inflation is slowing down. The Eurozone economy looks to be turning a corner and all this has boosted European equities, but these improvements are from a very low base and further weakness for the euro cannot be ruled out especially as the Greece issue rumbles on and on.
Today the focus will be on manufacturing data from across Europe and later in the day from the US as PMI surveys are released. This morning EURUSD is trading at 1.0775 still 300 points off the multi-year lows set in the middle of last month. Also, keep an eye on Iranian nuclear and sanction negotiations which have been extended by a day in a positive sign that there is a strong appetite to reach some sort of agreement. Even if there isn’t a formal agreement today there is the next target of June when further talks are due to take place, but this meeting has the potential to influence movements in both crude prices and the dollar.