Sentiments Stabilized On PBoC Statement, Dollar Staying In Range

Asian markets opened broadly higher following the 100 pts rebound in DOW overnight. Sentiments were lifted by a late statement from China's PBoC on Tuesday on addressing liquidity squeeze. PBoC said it injected funds into some financial institutions and would make similar moves in the future. It also urged lenders to handle liquidity fluctuations in calm and rational ways and said it will "take corresponding measures according to circumstances" to ensure market stability. That's the first official statement address the cash squeeze in China which sent overnight repo rate to a record high last week. And, analysts noted the sharp fall in market rates, including one-day and seven-day rates this week as a result of easing from the Chinese central bank. Which the news eased some worries in the markets, rebound in Asian stocks is quite weak so far and might not be able to sustain long.

In the currency markets, dollar consolidated in tight range against other major currencies this week so far. Even the relatively stronger USD/CAD turned sideway at around 1.05 level. Yen crosses lacked momentum on either side. It should be noted that 10 year US yields retreated after hitting another high on Monday at 2.657%. But the retreat was very shallow as it quickly rebounded to closed at 2.589%. Gold's selloff resumed today and dropped to as low as 1251.2 so far and it's still heading south towards 1200 psychological level. The broadly sentiments are still favoring more upside in the greenback.

In Europe, ECB president Draghi said that "price stability is assured, and the overall economic outlook still warrants an accommodative stance." He expected "monetary stimulus and improvements in financial markets will support a recovery later in the year." Meanwhile, he noted that the yet-to-be-used OMT is "even more essential now" because there are potential changes in the monetary stance "with associated uncertainty in other jurisdictions of the integrated global economy."

On the data front, Swiss UBS consumption indicator and German Gfk consumer sentiment will be featured in European session with BoE's financial stability report and UK CBI reported sales. Q1 GDP final reading from US will be the main focus in US session and is expected to be unrevised at 2.4%.