market relief

The Caixin survey of Chinese services in October came in at 51.2, and that compared with 50.6 in September. The Beijing authorities are trying to shift the focus of the economy towards the services sector, and it is clearly working.  

The FTSE 100 hit a three week high yesterday on the back of the slump in sterling. The dovish hike from the Bank of England (BoE) triggered a sell-off in the pound, which made the internationally focussed FTSE 100 very attractive.

After months of speculation the Bank of England (BoE) hiked interest rates for the first time in 10 years. It was a 0.25% hike to 0.5%, it reset the interest rate cut in August 2016. The BoE deliberately gave off the impression they won’t have hiking rates again in hurry, and that sealed sterling’s fate yesterday.     

Apple shares rose in post-market trading after it revealed a strong set of results. Earnings per share (EPS) for the fourth-quarter was $2.07, easily beating the $1.87 estimate. Revenue was $52.6 billion, and the consensus was for $50.7 billion. The tech giant saw revenue in China jump by 12% on the year – a welcome change from the fall in market share it was enduring.

Jerome Powell has been selected as the next Chair of the Federal Reserve. President Trump selected him as their views are similar. Mr Powell is neutral on interest rates, and Mr Trump would like to keep the US dollar a little on the soft side. Adding to that, Mr Powell feels that some of the regulation that was brought in after the financial crisis served its purpose at the time, but now believes some of it could be rolled back.

The US non-farm payrolls report at 12.30 (UK time) will be the highlight of the trading session. The consensus is for 310,000 jobs to have been added in October, and that compares with a decline of 33,000 jobs in September. The unemployment rate is tipped to remain at 4.2%. Average wage growth is tipped to slow to 0.2% from 0.5% on a month-on-month basis, and drop to 2.7% from 2.9% on a year-on-year basis.

The hurricanes have potentially skewed the data so we should look at the data over at two month period, and then average it out. Revisions to the previous month’s number is normal, but this time round we could we could see a major swing. If the US wants to stick to the path of hiking rates, it will need to keep producing solid earnings growth numbers. In order for the US economy to keep growing, Americans need to see a real rises in earnings, and in turn go out and spend some of their hard earned money.

EUR/USD – remains the 100-day moving average at 1.1700, and if it holds below that level it could send the market to the 1.1574. The 50-day moving average at 1.1837 could act as resistance to rallies.

GBP/USD – is still in its upward trend and while it is above the 1.3000 mark, the outlook may remain positive. Rallies may incur resistance at 1.3335. A break below 1.3000 could send it to 1.2900.

EUR/GBP – is eyeing the 50-day moving average at 0.8950, and a break above it might put 0.9049 on the radar. Moves lower could find support at 0.8733.

USD/JPY – has been pushing higher since early September, and the July high of 114.49 could be the next level to watch. A break above 114.49, might see the market target 115.62 and support may come into play at 113.00. The next support level below that could be the 200-day moving average at 111.74.

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