We had a mixed day yesterday across the trading sessions with pressure on stocks and risk earlier in the day abating in the US session as stronger earnings numbers helped to stimulate a rally. Sterling enjoyed a strong day as the likelihood of a Brexit extension increased, Cable reaching new highs on the year and EurGbp trading down to levels not seen since mid-November. The dollar retreated for the first time this week, partly influenced by the strong move in cable but also as it dropped against the other majors and EM’s. The US government shutdown saga continued to roll on with the positive sentiment derived from the upcoming vote in the Senate being countered by news that the government is preparing for it to progress up to March.
Sterling continues to trade in the Brexit wind and despite positive moves overnight on the back of a potential deadline extension, the market will be looking for evidence of real progress in the near future and the roadblocks that led to the original deal rejection are still very much in place. There will need to be concessions made across the board for a new deal to get through, at the first juncture this involves all UK political parties working together before then looking to the EU to once again come back to the negotiating table. At the moment with most involved sticking firmly to their long held opinions, it still seems like we’re a long way off a happy exit.
The Australian market will be focussing heavily on the latest employment data due out this morning, we’ve seen strong numbers over the last few months and analysts are looking for this trend to continue. Market expectations are for an increase of 18k jobs in December with the unemployment rate remaining at 5.1%. Currency traders will be looking for a large variance from expectation to jolt the Aussie out of it’s recent relatively tight trading range, although still trading very much as a risk proxy to global sentiment the ‘battler’ could see some sharp moves if we see a change in the underlying fundamentals.
Looking ahead to the rest of the trading day and it’s quiet through the rest of the Asian session but things could become lively in the European session. First up there are a raft of PMI numbers due but the main focus will be the latest ECB rate announcement . Once again no change is expected, but investors will be keen to hear the central banks views especially in light of Brexit developments and a recent run of weaker data. The US session has little in terms of data releases but expect markets to continue to trade in line with sentiment as the US-China trade situation and any developments on the government shut down influence market direction.