n a week dominated by Europe and the on-going to-ing and fro-ing in the US with respect to the fiscal cliff, markets will be turning their attention to the tribulations of the UK economy
today when the Chancellor of the Exchequer stands up to give the annual Autumn Statement.
Other interested observers are likely to be the ratings agencies with the UK's triple "A" credit rating
on a knife edge with all three of them, as the economy struggles with rising debt levels and stagnant growth.
It is widely expected that the Chancellor
will have to push out his timetable
well into the next parliament
on balancing the budget, given that the fall in tax revenues has meant that the UK is on target to borrow much more than planned in this fiscal year.
Today's services PMI
for November is expected to show an expansion of 51, a slight improvement on Octobers 50.6, however yesterday's construction PMI number painted a very weak picture of a sector ill at ease and at its weakest since December 2008.
Over the past few quarters this sector has been the biggest drag on GDP growth, hence the Chancellor's £5bn plan
to boost infrastructure, announced yesterday.
At around the same time the OBR
will in all likelihood downgrade its growth forecasts
further restricting the Chancellor’s room for manoeuvre, with respect to balancing the budget. A downgrade from 0.8% to zero growth
, or even worse is expected for 2012, while the 2013 estimate is also likely to be slashed.
Over in Europe
the economy is not in any better shape with November services PMI numbers
for Spain, Italy, France and Germany
due to show contractions across the board of 42, 46, 46.1 and 48 respectively. Retail sales
are also expected to decline 0.8% year on year.
We also have a Spanish bond auction
, which given the recent drop in yields is expected to get away without too many problems.
In the US
while markets continue to focus on the pantomime of the fiscal cliff negotiations, the economic data in some parts has given cause for concern.
This week’s disappointing ISM number a case in point with today's ADP employment report for November expected to show a slowing in jobs growth to 129k, down from 158k previously.
While Hurricane Sandy may have been a factor a disappointing number could raise concerns about the strength of Friday’s employment report which is expected to show a fairly weak number.
– the euro
continues to defy all attempts to move lower as it closes in the September highs at 1.3175. A break here targets the highs this year at 1.3485.
Interim support can be found at yesterday’s lows at 1.3040.
For the downside to open up again we need to see a break back below the 50 day MA and 1.2900 retargets a move towards the 200 day MA at 1.2790, while below that we also have trend line support from the 1.2050 lows which also comes in at 1.2790.
– yesterday we saw the pound break through both the 50 day MA at 1.6050 and channel line resistance from the 1.6310 highs which now has the potential to target 1.6180 as well as the 1.6250 resistance from the 1.6745 2011 highs.
Only a drop back through 1.6050 undermines this bullish scenario and targets a retest of the 1.5960 lows of last week.
Major trend line support remains at 1.5835 from the 1.5270 lows, as well as 1.5660.
– a higher high yesterday undermines the tweezers top scenario and keeps us on course towards the October highs at 0.8165 as the next resistance. Above 0.8165 targets 0.8220.
The move higher can only be undermined by a move below the 0.8100 level towards the 200 day MA support at 0.8050. Also on the downside we have trend line support at 0.8010 from the July lows at 0.7755.
– still within the potential double top pattern on the four hourly charts after the base held at 81.75. If we break below 81.70 then the potential is there for a move towards 80.50, and even 79.90.
We need a break above the 82.80 level to target a move towards the March highs above the 84.00 level.
Only below the 80.50 level suggests a move back towards the November lows at 79.00.
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