market relief

It was another robust performance on Wall Street last night as the Dow Jones cracked 25,000 and managed to close above that level, while the S&P 500 and NASDAQ 100 also registered solid gains. 

US stocks are getting massive millage of out the Trump tax reforms and the buying momentum is showing no signs of fatigue. The minutes from the Federal Reserve’s latest meeting points out that US central bankers also feel the tax changes will boost economic output.

The rally in US stocks yesterday was also assisted by the strong ADP employment report. In December, the US private sector employment report showed that 250,000 jobs were added, and that comfortably topped the forecast of 190,000. The ADP figures suggets a strong jobs market, and it has set the tone for the US non-farm payrolls, which is due out at 1.30pm (UK time) today.

Traders are anticipating the addition of 190,000 jobs, compared with the 228,000 that were added in November. Unemployment is expected to hold steady at 4.1%. On a month-on-month basis, average earnings are tipped to increase by 0.3% and on an annual basis they are forecast to rise by 2.5%. The US has been steadily creating new jobs over the past few years, but wage growth has been sluggish. If the US economy wants to step up a gear in terms of economic growth, wage growth and in turn spending levels will need to tick up.

Eurozone equity markets soared yesterday as the region continues to grow. The major economies of the currency bloc posted solid services data, and the impressive manufacturing figures that were released earlier in the week were still on traders’ minds. The European Central Bank (ECB) begun a policy of monetary easing in 2015 and we are now seeing the aggressive scheme payoff.

For now equity traders haven’t been put off by the strength of the euro, but we could see trading session where the lofty value of the single currency may work against the Continental stock markets.  

At 10am (UK time) the eurozne will release the CPI inflation rate, and consensus is for the rate to fall to 1.4% from 1.5%. The ECB are concerned about the mediocre inflation rate, which could lead to the stimulus package be expanded or extended, and that could help to keep equities firm.

EUR/USD – has been edging higher since early-November and if it holds above the 1.2000 mark, it could target 1.2092. Support could be found at the 1.1900 area or at 1.1825 – the 100-day moving average.

GBP/USD – has been pushing higher since March and is above the trend line support which comes into play in the 1.3340 region. Rallies could encounter resistance at 1.3600 or 1.3659. A move below 1.3340 may send the market to 1.3200. 

EUR/GBP – has been edging higher since early December, and it has managed to move above the 50-day moving average at 0.8854. If it can hold above 0.8854, it could target the 100-day moving average ay 0.8926, or 0.9000. A break below 0.8854 could see it retest 0.8800. 

USD/JPY – has been trading within a small range recently and has moved above the 50-day moving average at 112.92, and if it remains above that metric it could target the 113.75 region. A break below 112.92 could find support in the 112.00 region.
 

CMC Markets is an execution-only service provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.