US markets had another strong day to recoup last weeks losses after a mixed bag of data and the pound surged to it’s highest level since June after parliament voted not to leave the EU without a deal. US data was mixed with PPI numbers missing expectation and Durable goods numbers generally exceeding it, the market looked to the positive side of things and we saw good gains across the major indices with both the S&P and Nasdaq finishing up 0.69% and the Dow not far behind with a positive 0.58% close. The pound surged higher after parliament voted against a ‘no deal’ Brexit pushing up expectations for an article 50 extension, cable is back trading above 1.3300 and EurGbp down to 0.8500, sterling traders are bracing for more volatility ahead. The dollar continued to drop lower against most of the other majors with the usual exception of the Yen, the Dxy now trading under 96.50 and Oil jumped on the back of lower US stockpiles, WTI up to $58/b and Brent to $67.5/b.
Global markets have had a much better week so far and investor sentiment seems to be much more positive than just a week ago, however there are some storm clouds on the horizon that could lead to a change of direction as we move towards the weekend. Talk from both China and the US on the pending trade deal has been relatively quiet this week but news overnight that Donald Trump would reject a deal if he doesn’t like it and advice from Robert Lighthizer that there are still ‘major issues’ that need to be resolved are pushing expectations of a signing session further down the road. China is set to report its weakest Industrial Production growth numbers since February 2016 today and this may also weigh on sentiment. If you add the volatility of the Brexit situation on top of these factors and you could have the ingredients of a sharp downturn in markets for the next couple of sessions.
Looking ahead at todays trading and those Chinese data releases will be the major focus for traders in the Asian session. There is yet another vote on Brexit in the House of Commons tonight this time on the article 50 trigger postponement which is likely to pass but little else in the way of notable risk events in the London session. The New York session is also relatively quiet in terms of fundamental data releases however investors will be monitoring news wires closely for any updates on trade and other geo-political factors influencing the markets.