The German government's 10year bond yields hit an all-time low of 0.048% on April 17, before moving higher as deflation fears eased amid recovering oil prices and following the introduction of the European Central Bank's massive quantitative easing program.
Yields on German 10-Year bonds have surged yesterday by 17.03% to hit 0.701% during European hours. Meanwhile, the yield on Italian 10year bonds rose by 6.44% to hit at 1.867%, while Spain's 10-Year yield jumped by 4.72% to hit at 1.819%. While the yield on 10Year treasury in the U.S. rose by 2.35% to hit at 2.325%, the highest level since December.
On the other hand, the GDP in France expanded 0.6% in the Q1 of 2015 over the previous quarter. In recent times, France has been losing competitiveness and capacity to attract private investment due to rigid labour laws, high taxes and social contributions along with low levels of innovation. As a result, its export oriented industrial base gradually eroded creating a systemic trade deficit and increasing unemployment.
Hence, European stock markets were under heavy selling pressure as DAX tumbled 2.4%, the EURO STOXX 50 dropped 2.2%, CAC lost 2.1% while FTSE 100 slumped 1.95%.
Currency and Futures Market Watch:
The Euro was up by 0.25% to trade at 1.1256 against USD owing to discount the above fundamental factors. The Dow futures pointed to a drop of 0.75%, the S&P 500 futures shed 0.7%, while the Nasdaq 100 futures slumped 0.8%.
Although Germany contributes good set of numbers to drag Euro for strength, we look for EURUSD to test the recent strong support at 1.1151 which took on 11th May. Resistance is marked at 1.1322. In our recent post as we had already mentioned put/call ratio impact wherein we stated short build ups on near and mid month's Futures contracts of EURUSD pair and in Option markets we noticed that the next month's contracts have seen highest volumes (1351 contracts) and open interest (1824 adj) with highest put/call ratio of 0.64.
