Sometimes We Need To Look Back Before We Can Look Ahead

By FXEmpire.com

Sometimes before we can move forward we need to look back and review the week that has past to put the new week in context.

The week ended with the disappointing U.S Nonfarm payrolls numbers released on the “Good Friday” that set the tone for the last week, which saw financial markets kick starting the second quarter on a disappointing note and markets beginning to question the U.S economic recovery.

The market sentiment was further dented after China reported data showing increases in inflation, downplaying bets on an ease in monetary policy to bring the economy back on track.

However, unexpectedly weak Chinese economic growth, at 3 year low, revived hopes of an immediate central bank action to evade any “hard landing” for the Chinese economy. On the whole, weak economic data from the world’s first and second largest economies scuffed market outlook fuelling concerns over the world economic growth prospect.

The Euro zone crisis, which had taken a back seat after ECB’s lending action and Greek debt deal, resurfaced with fears of contagion spreading to larger economies of Spain and Italy after yields on their respective bond scaled up higher pushing 17-nation euro currency on a spiral downward.

The borrowing by Spanish banks from the ECB hit a new record in March at 227.6 billion euros, a sign of weak confidence in Spain’s troubled financial sector. However, reports that ECB was eyeing bond buying to skirt off the crisis from spreading further limited losses for the Euro currency and somewhat cushioned sentiments from Europe even though there was cynicism amongst investors.

After having mention of an “accommodative policy” recently, the U.S Federal reserve again reiterated it would leave benchmark interest rate near zero levels till 2014 and could alleviate monetary policies to stem fallout for the economy in midst of recent string of disappointing job stats.

After bears had taken control for the first three days, the bulls re-entered on optimism over Fed’s QE3 action in near term. The U.S. trade deficit narrowed much more than expected to $46.0 billion in February, on an unexpected decline in imports and sharp narrowing of the deficit with China. The decline in imports was largely attributed to falling crude oil imports, which fell to lowest volume since 1997.

Copper logged its biggest weekly decline since mid-December, on concern that demand may falter amid slowing economic growth in China, the world’s top consumer, and was the most bearish commodity last week. The weakening metal demand and rising stockpiles in Shanghai and LME are major drivers of copper prices on a downtrend.

However, any central bank action from China and strong housing numbers from the U.S could bolster appetite for the metal looking into this week.

Now that we have refreshed our memories, we can once again deal with the markets this week.

With Spain once again remaining in center stage, along with worrisome US eco data.

Originally posted here