Most of the major stock markets were closed yesterday as it was May Day, and therefore the ones that were open experienced low volatility.
The FTSE 100 lost ground as a sell-off in energy stocks led the charge lower, and there were declines in consumer goods and health care stocks too. The FTSE 100 fell back to a level not seen since early April yesterday, but last week it hit a six-month high, so the bullish move is still in play.
The Federal Reserve kept rates on hold between 2.25% and 2.5% - meeting expectations. The central bank noted that economic growth and the jobs market had been ‘solid’. The Fed pointed out that inflation, and in particular the cost of items excluding food and energy remained below their 2% target. The NASDAQ 100 and the S&P 500 were helped along by the rally in Apple on the back of the upbeat quarterly update on Tuesday night, but the indices finished in the red after the Fed’s update. Going into the Fed meeting, President Trump had been calling for a rate cut, and given the Fed’s assessment of the growth rate, it seems that the prospect of a rate cut in the future has diminished.
The US dollar pushed higher in the wake of the Fed’s announcement, while the gold market came under pressure from the firmer greenback.
It was reported that it is possible that the US and Chinese trade talks will be wrapped up by next Friday, and the Hang Seng traded higher on the back of this.
Oil was already sliding on the run up to the Energy Information Administration report, and when the update showed that US oil and gas inventories jumped by 9.93 million barrels and 910,000 barrels respectively, the energy market continued to drop. The announcement tallied up with the American Petroleum Institute report which showed a build of 6.81 million barrels.
The Bank of England (BoE) will reveal its interest rate decision at 12pm (UK time), and the Mark Carney’s press conference will be follow at 12.30pm (UK time). Economists are expecting the interest rate to hold steady at 0.75%, and that all nine members are tipped to back that view. The fact that Brexit has been delayed until possibly as late as October means the BoE are highly unlikely to make any major changes to monetary policy between now and then.
Recently we have seen some mixed reports from the UK economy. Headline inflation is sitting at 1.9%, and the BoE’s target is 2%. The core inflation rate remains at 1.8% - its joint lowest level since March 2017. Keep in mind the services PMI contracted in March. Given these updates, demand appears to be a little soft, but on the bright side, the unemployment rate is at its lowest level since the 1970’s.
The major eurozone economies will release their manufacturing PMI reports today. Between 8.15am (UK time), and 8.55am (UK time) Spain, Italy, France and Germany will reveal their reports, and the consensus estimate is 51.2, 47.8, 49.6, and 44.5 respectively. With the exception of Spain, all the reports are currently in contraction territory, and dealers will be keen to find out if any improvements are made.
The UK construction UK PMI report is due out at 9.30am (UK time) and economists are expecting the reading to rebound to 50.3 from 49.7 in April.
US jobless claims will be announced at 1.30pm (UK time) and dealers are anticipating the reading to dip to 215,000, from last week’s 230,000. The factory orders update is expected to be 1.5% for March, and the announcement will be at 3pm (UK time). Yesterday, the ADP employment report came in at 275,000 – it highest reading since July 2018, so the jobs market is clearly robust.
EUR/USD – has been broadly pushing lower since early January, and if the negative move continues it might target the 1.1000 area. Resistance might be found at 1.3220.
GBP/USD – has been driving higher since early December, and if it holds the 200-day moving average at 1.2964, it might target the 1.3200 area. A move to the downside might retest the 1.2775 region.
EUR/GBP – while its holds below the 200-day moving average at 0.8813, its outlook is likely to be negative. 0.8471 might act as support. A rally might encounter resistance at 0.8800.
USD/JPY – has been largely been pushing higher throughout 2019, and a break above the 112.00 area, might bring 113.70 into play. 110.77 – 100-day moving average, might provide support.
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