Last week we saw a rally in global stock markets as tensions cooled a little in Hong Kong, and the US-China trading relationship improved somewhat too. Carrie Lam, Hong Kong’s chief executive, called for the withdrawal of the controversial extradition bill, and that lifted sentiment in the region and around the world. Trade talks between the US and China are planned to take place in October, and that provided the biggest boost to stocks last week.
At the beginning of September, the US and China imposed more tariffs on each other, and in terms of levies, things are at the worst they have been in the trade spat, Trade negotiations will take place next month, and even though there are no guarantee things will work out, the fact the discussions are taking place has lifted sentiment.
Over the weekend, there were some disappointing trade figures from China. Exports fell by 1% while economists were expecting an increase of 2%. Imports dropped by 5.6%, and the consensus estimate was for a 6% fall. China’s exports to the US declined by 16% on an annual basis, and imports from the US fell by 22.4%, and these figures underline the trade dispute.
Friday’s session finished on a less optimistic note on the back of the broadly positive US non-farm payrolls report. The August report showed that 130,000 jobs were added, which undershot forecasts, and the July reading was revised slightly lower too. The unemployment rate held steady at 3.7%, and annual wages grew by 3.2%, which is an impressive rate when you consider that CPI is 1.8%. Workers who earn more tend to spend more, and overall it was a pretty good report, but the fact the headline number was underwhelming, it took away from the rest of the update.
Sterling had a rocky ride last week on account of the chaotic events in UK politics. The political uncertainty on account of Brexit hit the pound hard at the beginning of the week, but there was a sharp snapback from Tuesday, and it would appear that the pound has found a floor in the near-term, but volatility is likely to remain as the political situation unfolds.
Gold and silver also endured relatively high volatility last week as the metal turned sharply lower on Thursday as traders moved towards a more risk-on strategy, and the commodities were hit hard. It is worth noting that gold reached a six-year high recently, and silver hit its highest level in over two years recently.
At 9.30am (UK time), the UK will release the GDP estimate, and economists are expecting 0.1% growth for July on a month-on-month basis. At the same time, industrial output and manufacturing output reports will be released, and the consensus estimate is -0.1% and -0.1% respectively. The UK economy contracted in the second quarter, and any signs of further weakness will increase chatter about a possible recession.
EUR/USD – snapped back last week, and if it holds above 1.1000, it might pave the way for 1.1164 to be retested. If the wider bearish trend continues, it might target at 1.0900.
GBP/USD – last Tuesday’s daily candle has the potential to be a hammer, and if it holds above the 1.2200 area, it 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 107.20 area – 50-day moving average, it might bring 108.32 (100-day moving average) into play. Should the wider downtrend continue, it might retest the 104.50 area.
FTSE 100is expected to open 23 points higher at 7,305
DAX is expected to open 19 points higher at 12,210
CAC 40 is expected to open 5 points lower at 5,598
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