Despite some upbeat second tier data, the pound has come under some selling pressure this morning with sterling sliding below the 1.35 handle against the US dollar to trade at its lowest level in a fortnight. The depreciation had also boosted the FTSE 100 with London’s leading index making another all-time high above 7750. However, unconfirmed reports that China is said to recommend slowing or halting the purchase of US treasuries has seen these move reverse somewhat in the latter part of this morning’s trade.
Positive data fails to support the pound
The latest economic releases from the UK have shown better than expected readings with both manufacturing and industrial production rising higher. These data points refer to the month of November and given that this morning the October numbers were revised higher, it is a fairly clear positive. However, the pound has come under pressure since the release with the GBP/USD dropping to its lowest level in 2 weeks and moving below the 1.35 level. It’s not just the most widely traded GBP pair that has shown weakness in sterling with all the other G10 currencies rising against the pound with the Japanese yen the strongest.
Oil price continues to rise
The second half of 2017 was an enjoyable one for oil bulls with the price of Brent crude gaining by more than 50%. The new year has begun in much the same fashion with further gains seen and the benchmark hit its highest level since May 2015 overnight following a large drop in the private ADP inventory numbers from the US. This afternoon sees the more widely viewed DOE figures released and whilst an extreme level of longs in the market present the risk of a sharp reversal, for now the trend is clearly higher and we could well get a $70 handle in the not too distant future - especially if today’s data shows a large drop in stockpiles.
China to halt UST purchases?
Tensions between the two largest economies in the world could be set to rise once more after this morning an unconfirmed report stated that China intended to stop its purchases of US treasuries. The source stated that US government bonds are becoming less attractive compared to others and assets and the trade tensions with the US may provide a reason to slow or stop buying American debt. The market has reacted strongly to this news with US treasuries predictably falling seeing their yield rising to its highest level since last March. The USD has also taken a hit alongside US stock futures whilst gold has spiked higher by around 1%.