Stock markets in Europe and the US largely traded higher on the back of an announcement from China that trade talks with the US will take place next month. In recent months, there has been a lot of tough talk from both sides, but the prospect of the two sides sitting down, and holding trade talks has lifted sentiment. The trade spat has been going on for well over a few years, and it is unlikely to be wrapped up soon, but at the moment things are going in the right direction.
Sterling’s rebound continued despite the various goings-on in UK politics. The pound has come a long way since Tuesday morning, and it appears to have found a floor for now. Some traders are terrified about a no-deal Brexit, and seeing as it looks like the UK’s exit from the EU might be pushed back until the end of January, the extreme pressure on the pound has lifted for now at least.
The US posted some broadly positive economic reports yesterday, and that added to the bullish move on Wall Street. The ADP employment report came in at 195,000, which was a big improvement the revised July reading of 142,000, and economists were expecting 149,000. The jobless claims reading was 217,000, which was essentially unchanged on the week, and in line with forecasts. The final services PMI and ISM non-manufacturing readings were 50.7, and 56.4, and when taken together is fairly positive.
Gold and silver endured share sell-offs yesterday on account of the risk-on strategy by traders. The metals have benefitted from their safe haven status in recent months, and not long ago, gold hit a six-year hit, and silver reached a two year high. Trade tensions and worries about the global economy helped the commodity, and yesterday we saw a reversal. Both metals are still in their bullish trends.
Oil was also helped by the global optimism in relation to the US-China trade situation. Beijing has recently started imposing tariffs on US oil imports, and the news that trade discussions are to go ahead next month lifted the energy market.
The Halifax survey of UK house prices will be released at 8.30am (UK time), and then on a monthly basis, prices are tipped to increase by 0.2%, and that would be a rebound from the 0.2% fall in July.
At 10 am (UK time), the eurozone revised GDP update will be announced, and in the second quarter, the reading is tipped to hold steady at 0.2%.
The US non-farm payrolls at 1.30pm (UK time) is likely to be the highlight of the session, and the headline report is expected to be 158,000, and keep in mind the July reading was 164,000. The unemployment rate is expected to hold steady at 3.7%. The yearly average earnings reading is expected to cool to 3.1% from 3.2%. The earning component will be closely watched as people who earn more, tend to spend more, and that will drive the economy. There is a lot of chatter about a rate cut from the Fed later this month, and the jobs report could provide us with a clue about future monetary policy from the Fed.
The Canadian jobs data will be announced at the same time the US one, and the unemployment rate is expected to hold steady at 5.7%, and the employment change is tipped to show an increase of 15,000, which would be a rebound from the 24,200 declines in July. Earlier this week the Bank of Canada kept rates on hold, and the neutral language in the statement didn’t give any indications of a desire to cut rates in the near-term.
EUR/USD – remains in the wider downward trend of 2019, and if the bearish moves continue, it might target the 1.0900 area. A move back through 1.1000, might pave the way for 1.1164 to be retested.
GBP/USD – Tuesday’s daily candle has the potential to be a hammer, and a break above the 1.2200 area might bring 1.2309 into play. Support might be found at 1.1900, should the wider bearish move continue.
EUR/GBP – the weekly candle from mid-August appears to be a bearish reversal, and if the downward movement continues, it might target 0.8872. A rebound in the currency pair might bring 0.9200 into play.
USD/JPY– rebounded last week, and a break above the 107.00 area, might bring 108.47 (100-day moving average) into play. Should the wider downtrend continue, it might retest the 104.50 area.
FTSE 100 is expected to open 9 points lower at 7,262
DAX is expected to open 2 points higher at 12,128
CAC 40 is expected to open 4 points lower at 5,589
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