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Dollar driven by strong US consumer data

Stock markets are set for a positive finish today as a lack of negative news has encouraged buying. 


The US-China trade dispute is still ongoing, but while there isn’t a war of words, dealers are content to buy back into the market. The slightly dovish update from the European Central Bank yesterday is still echoing around continental Europe.

JD Wetherspoons announced a 1.98% rise in full-year revenue and a 16.5% increase in pre-tax profit. The firm cited the World Cup and the warm weather as reasons for its respectable performance. The pub chain is bucking the wider trend of pub closures across the UK, and the firm is expanding in Ireland too. It’s not all good news though, as higher wages, increased power costs and hiked rents are playing into the mix too. The higher cost to entry could make it more difficult for independent pubs, and could bring about consolidation in the industry. The share price has been pushing higher for over two years, and if the bullish mood persist, it could retest 1,341p.

Mark Carney, the governor of the Bank of England (BoE) warned that the worst case scenario of a ‘no-deal Brexit’ could lead to interest rates being hiked, and potentially see house prices fall as much as 35%. The reaction from the home builders like Barratt Developments and Taylor Wimpey has been muted.  The BoE has been wrong before when it comes to house predictions in relation to Brexit, and it seems that investors aren’t overly worried by the announcement.

BHP Billiton and Anglo American are in demand today after China announced a broadly positive set of economic announcements overnight. The industrial production and retail sales reports showed growth on the previous month, and topped economists’ forecasts.  It is worth noting that fixed asset investment report fell to yet another record-low, and it is worrying for the long-term prospects of China.

The Co-operative group posted a 4.4% rise in like-for-like food sales, and the division makes up three-quarters of the group’s revenue. The food sales figures are impressive seeing as it has been a tough time for sector in recent years. The firm’s acquisition of Nisa is already showing positive results as it helped sales and profit rise by 10% and 85% respectively. 


Stocks started off higher this afternoon as no further developments in the trade negotiations with China, and broadly upbeat economic updates buoyed sentiment. There was some pressure applied to US indices in the wake of the strong University of Michigan consumer sentiment report as interest rate hike fears were stoked. 

Retail sales were a mixed bag as the August reports missed forecasts, bur the positive revision to the July readings made up for them. The headline figure was 0.1%, while economists were expecting 0.4% growth, and the July reading was revised to 0.7% from 0.5%. The report which strips out auto sales saw 0.3% growth in August, which missed the 0.5% consensus estimate. The July reading was raised to 0.9% from 0.6%. The University of Michigan consumer sentiment jumped to 100.8 in September – a six month high. Overall, it has been a positive say for consumer data. 


EUR/USD is in the red due to the firmer US dollar on account of the strong consumer reports. On an annual basis Italian inflation in August came in at 1.6%, and the July reading was revised down to 1.6% from 1.7%. The mediocre report ties in with the slip in German inflation that we saw yesterday.

GBP/USD has also been dragged lower by the firmer US dollar. Mr Caney’s comments had little impact on the pound today. It would appear that traders are remembering how the BoE made predictions about the Brexit vote that have since been proved inaccurate, so they are less fearful about the announcement. That being said, the political situation will be closely monitored by traders, and any sign of a ‘no-deal Brexit’ happening is likely to put pressure on the pound. 


Gold was nudged lower by the pick-up in the US dollar on the back of the retail sales and Michigan report. The metal has been in a relatively small trading range recently and it keeps dancing around the $1,200 mark. Gold has been in a wider downward trend for several months, and while it remains below the 50-day moving average at $1 211, its outlook could remain negative.

The oil market is a little higher today after the major sell-off yesterday. Hurricane Florence was downgraded to a category two storm and the energy market tumbled yesterday after traders realised the adverse weather wouldn’t have as big an impact as originally anticipated.  The oil market has stabilised today, but traders aren’t overly bullish in light of the update from US energy secretary Rick Perry, who said Saudi Arabia and Russia are trying to stop oil from surging.

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