It’s been a bit of a strange week for equity markets, slipping back initially at the start on concerns that the sharp move higher in oil prices caused by last weekend’s drone strike on Saudi Arabia’s oil infrastructure might knock the stuffing out of the global economy in the coming weeks and months.

The lack of any escalation so far appears to have tempered a good proportion of this week’s surge higher, in the oil price, prompting equity markets to recover from their lows, nonetheless there remains a significant amount of unease as to what might unfold over the course of the next few days and weeks.

As a result of this uncertainty equity markets have struggled to push on significantly from the gains, we’ve seen over the course of the previous three weeks, with US markets struggling to push on beyond their previous record highs from July.

Bond markets have been a little more skittish with tensions in the repo market likely to remain on a day when triple witching takes place. The Fed will likely inject further liquidity into a market that appears to be suffering from a shortage of US dollars, and will probably continue to do so until the end of the quarter, as banks and hedge funds tidy up their balance sheets and boost their cash levels before the end of the quarter.

This week’s central bank meetings have gone some way to tempering some of this week’s unease, with the Federal Reserve once again cutting rates, and the People’s Bank of China modestly trimmed its one year loan rate this morning, while the Swiss National Bank, Bank of Japan and the Bank of England left policy unchanged. Nonetheless the lack of more aggressive action by all of these major players does appear to give the impression that all are operating at the limits of their ability to ease further, and in so doing mitigate any further economic weakness.

Yesterday the OECD acknowledged the challenges facing the global economy by downgrading its forecasts for the global economy by sharply downgrading its forecasts for 2019, from 3.2% to 2.9% the lowest level since 2009, citing the US, China trade war, a slowing global economy, as well as Brexit concerns.

These challenges were no better illustrated yesterday when the European Central Bank launched its first tranche of three-year loans at zero rates and below, and which fell well short of expectations. Instead of the €20bn to €100bn of loans that was expected the princely sum of €3.4bn found its way out of the door.

There may have been any number of reasons for the lack of demand, but if no-one wants to invest or borrow money, no amount of cheap cash will compel them to do so. This is the problem Europe faces at the moment. Quite simply firms will not commit to large scale investment decisions when there is no certainty about business conditions at a time when the US may want to turn its attention to Europe where tariffs are concerned, China is slowing down, and Brexit is unresolved.

The pound did get a lift last night when European Commission President Jean Claude Juncker said that he would be prepared to get rid of the Irish backstop, if the UK can present viable alternatives that protect the integrity of the single market. This presents a significant shift of position by the commission which until recently had refused point blank any prospect that the withdrawal agreement could be changed.

EURUSD – still in the downtrend but stuck in a range currently with support at the 1.0925 area. We currently have resistance back near the 50-day MA now at 1.1120. While below here the risk remains for a retest of the lows.

GBPUSD – has continued to edge higher, hitting two-month highs at 1.2560 yesterday, as it looks to head towards the 200-day MA at 1.2740.  We have support at the lows this week at 1.2380, while below that larger support at the 1.2280 area.

EURGBP – appears to have cracked below the 200-day MA at 0.8840, as it looks to close in on the 0.8795 level initially, which would be a 61.8% retrace of the entire 0.8475/ 0.9325 up move. A break below 0.8790 opens up 0.8720. We currently have resistance at the 0.8900 area which should contain any pullbacks.

USDJPY – this week’s failure at 108.50 has seen the US dollar slide back, opening up the prospect of a move back to the 107.20 level, and 106.00, after yesterday’s bearish daily reversal. Only a move back above this week’s high has the potential to negate.

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