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Brexit breakthrough boosts sterling

The UK and the EU have made sufficient progress in Brexit talks, allowing them to move on to the trade aspect of the negations.

The political mood has been lifted, but the FTSE 100 is underperforming its continental counterparts due to a firmer pound.

The DAX has been given a boost after Martin Schulz, of the Social Democrats suggested his party is warming up to the idea of entering into coalition talks with Angela Merkel’s Christian Democratic Union (CDU). The German economy has been performing well without a functioning government, and today’s news has added to the positive sentiment.

At 1.30pm (UK time) the US publishes the non-farm payrolls report, and dealers are expecting a reading of 200,000. That number would be a decline on November’s report, which showed that 261,000 jobs were added in October. The unemployment rate is expected to hold steady at 4.1%. The US will need to produce respectable wage growth figures if it wants its economy to keep ticking along. On a year-on-year basis, the average earnings rate is anticipated to tick up to 2.5% from 2.4%.

Berkeley Group shares are up 8.1% after the company posted a 14% rise in revenue and a 36% jump in pre-tax profits. The homebuilder now expects to clock up £3.3 billion in pre-tax profits in the five years from May 2016, and that is a 10% improvement on the previous guidance. The stock is in a solid upward trend and hit a new all-time high today, so the sentiment is clearly bullish.  

GBP/USD was pushed higher by the news that sufficient progress was made in relation to the Brexit talks. The trade talks will be next on the agenda for the EU and the UK. Sterling is still in its upward trend versus the US dollar.

EUR/USD is weaker as the US dollar continues to creep higher. The greenback has been on a positive run lately, and traders will be paying close attention to the jobs report at lunchtime.

We are expecting the Dow Jones to open up 32 points at 24,243, and we are calling the S&P 500 up 6 points at 2643.

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