market relief

Worldwide stocks markets endured losses at the back end of last week as traders were concerned about the state of global growth. 

China showed additional signs of slowing down after the retail sales and industrial production reports disappointed. Both reports showed a decline on the month in terms of growth, and they undershot economists’ expectations too. The underwhelming economic updates come amid unresolved trade talks with the US.

Europe showed signs of weakness too. The German services PMI report dropped from 53.3 to 52.5 – a five month low. The French services PMI and manufacturing PMI reports came in at 49.6 and 49.7 respectively. A reading below 50.0 points to negative growth, and this is very worrying as the two largest economies in the eurozone registered poor reports. It’s clear the protests in France are having negative economic repercussions. The Italian budget saga is still ongoing, and that has the potential to spark another round of the eurozone debt crisis.

Asian markets saw low volatility overnight, and were mixed. The Bank of International Settlements warned that the normalisation of central bank policies is likely to trigger further additional sell-offs in stocks.

The euro will be in focus today as the latest inflation figures will be reported at 10am (UK time). The headline CPI reading is tipped to fall to 2% from 2.2%. While the CPI report that strips out food and energy is expected to fall to 1.1% from 1.2%. Last week we heard from Mario Draghi, and even though there were some mixed messages from the central banker, Mr Draghi cautioned about lower inflation.

Brexit is still on the agenda and the government seems to be divided over the possible outcomes. Theresa May’s deal isn’t but popular, but neither is the idea of no-deal Brexit or a second referendum. The Prime Minister has criticised the idea of a second referendum, as it would beach the trust of the public. Sterling is likely to favour a softer Brexit, but that may not go down well with MPs or voters.   

At 1.30pm (UK time) the US will announce the latest New York empire manufacturing report and the consensus estimate is 20.6, which was would be a decline from the 23.3 in the previous reading.   

EUR/USD – has been diving lower since late September and if it holds below the 1.1510/00 region, it could pave the way for the 1.1215 area to be retested. A move to the upside could run into resistance at 1.1493 – the 100-day moving average.

GBP/USD – bullish engulfing might see a move back toward 1.3000. Another move lower might bring 1.2365 into play. 

EUR/GBP – the bearish engulfing might drive the market to the 200-day moving average at 0.8838. If the wider rally continues, it might target 0.9100.

USD/JPY – the upward trend that began in March is still intact, and if the positive move continues it might target 114.73. Support might be found at 111.39. 

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