FRANCE AUCTION RESULTS: IL OATs

Q: In the context of uncertainty, how should the CB respond? Will it be easier to deal with this in the June forecast round?

A: We should not limit ourselves by stating publicly or privately that we can only take decisions at forecast meetings. That would limit us to four meetings a year.

• In case trade tensions are amplified and there is a downward impact on growth while inflation impacts are uncertain, there is a risk of undershooting our target. This alternative scenario also needs to be borne in mind, even if not the central case.
• Data dependency not backward looking, it is forward looking not least because the price stability target is set over the medium term. 

• The noted European equity strength has also been underpinning single currency outperformance this morning, as EURUSD notably printed a fresh recovery high of 1.0955 ahead of the German fiscal vote this morning. Spot rising above the bull trigger at 1.0947 strengthens the current uptrend and signals scope for a move towards pivot resistance at 1.10 and a more notable cluster of medium-term resistance around the 1.12 mark.
• Another standout is EURJPY with a 0.65% session gain at typing. Both legs of the trade have been working in tandem as the European risk-positive sentiment also weighs on the Yen. Sustained clearance of initial resistance at 164.08 should pave the way for a move to 164.90, the Dec 30 high.
• Recall that the Bundestag session is underway, having started at 10:00 CET/09:00 GMT, with the debate surrounding the amendments to the relevant fiscal laws scheduled to start at 10:35 CET/09:35 GMT.

• MNI: GERMANY ZEW MAR ECONOMIC EXPECTATIONS 51.6
• MNI: GERMANY ZEW MAR CURRENT CONDITIONS -87.6