Geopolitical tensions weigh on risk

Weekend news reports have dominated market sentiment at the beginning of a week that is likely to be determined by inflations reading and Central Banks. Markets don’t like uncertainty and with newswires reporting advancing militant Islamic insurgents committing shocking atrocities to Iraqi soldiers amid reports that Bagdad airport has been attacked it’s not surprising to see oil, precious metals and safe haven currencies trading with a bid tone. The situation in Ukraine has certainly not helped equity markets as reports suggest that the county risks its supply of natural gas from Russia if a payment deadline is not met as reports circulate that Ukrainian military aircraft have been shot down.

The market will be focusing on inflation data and central bank activity this week. The FOMC on Wednesday evening is likely to produce a further $10 billion tapering of asset purchases to $35 billion per month with the reduction as usual likely to be split evenly between treasuries and mortgage backed securities. There are some suggestions we may get a dovish tone from FOMC members following the disappointment to Q1 GDP in the US. Later in the week the market will be looking for any reaction from the SNB at their first meeting since the ECB imposed a negative rate policy measure.

Inflation data from the EU, UK and US is likely to be a mild distraction from the world cup. Today sees the release of inflation data from Europe along with industrial production figures from the US and the latest reading from the Empire manufacturing index as positioning data from the CFTC show dollar longs approaching four-year highs.

EUR/USD

Supports 1.3530-1.3500-1.3480 | Resistance 1.3580-1.3605-1.3645

USD/JPY

Supports 101.55-101.10-100.75 | Resistance 102.10-102.50-102.85

GBP/USD

Supports 1.6950-1.6920-1.6885 | Resistance 1.7045-1.7100-1.7150