While European markets finished in positive territory yesterday it was once again the FTSE 100 which led the way with another record close, an eleventh successive day of gains, as well as the ninth successive day of record closes.
US markets were once again more subdued with a second day of sharp declines in the oil price weighing on the energy sector and the Dow in particular, which once again failed with another attempt at the 20k level, closing below the 19,900 level for the second day in a row.
The slide in oil prices appears to have caught a lot of major market players the wrong side hitting a one month low yesterday on doubts about the effectiveness of output cuts against the prospect of rising US production and inventory levels.
The recent subdued nature of US stock markets may change later today in the aftermath of today’s press conference in New York by President elect Donald Trump due at 11am Eastern time, when he is expected to answer questions on a variety of subjects in anticipation of when he takes over from President Obama in nine days’ time.
After a pretty rubbish few days the pound enjoyed a little bit of a respite yesterday, stopping the rot against the majority of its G10 currency counterparts.
On the data front the UK economy has been performing well beyond expectations, not that you’d know it from the movement in the exchange rate in the past few weeks.
We’ve seen robust PMI data across all major sectors over the last three months of 2016, while the consumer has remained upbeat while at the same time spending money in the shops in such a manner to send annual retail sales growth to the best levels seen in a decade.
Despite all of this positive data the pound has been the worst performing G10 currency in the last week as well as the last month, as investors continue to fret about the UK’s future relationship with the European Union.
The overriding consensus appears to be that disaster has merely been deferred rather than avoided, and it seems unlikely that today’s economic data will change the current pessimistic narrative irrespective of whether it is good or disappointing.
The latest ONS manufacturing and industrial production numbers for November are expected to show a strong rebound from the disappointing numbers seen in October, with expectations of a rise of 0.5% and 1% respectively. The sharp declines seen in the ONS October numbers were particularly disappointing given that the equivalent PMI data were quite strong, however the ONS numbers had been skewed by the shutdown of a North Sea oil field for maintenance which shouldn’t be the case this time.
November construction output is also expected to bounce back after a 0.6% decline in October
Also due out is the November trade balance which is expected to widen out to -£3.5bn from -£1.97bn.
The latest NIESR GDP estimate for the UK economy is also expected to show a decent level of growth for December of 0.5%.
EUR/USD – continues to find itself capped at the 1.0620 area, while finding support down near 1.0500. A break of the 1.0500 level could signal a move back to the recent 1.0340 lows. While above the 1.0500 area we could see a move back towards 1.0700, but while below 1.0700 the prospect of a move towards parity still remains.
GBP/USD – while the pound has remained under pressure we still remain above the support area between the 1.2080 and 1.2100 area. A move below 1.2080 could well open up the previous lows below 1.2000, but for now we look set to continue to range trade between 1.2100 and 1.2500.
EUR/GBP – we’ve seen another spike higher this time to 0.8764 however we haven’t been able to hold above the 0.8700 area, which again suggests that we could be building up for a return to the 0.8580 area.
USD/JPY – its only taken a couple of days to round trip back to the levels seen pre last Friday’s US jobs report with the key support area down near 115.05 and 114.80 remaining a key support area. Big resistance remains back at the potential double top formation highs at 118.65.
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