The strengthening of the USD is mixed across forex, as EUR takes a dive but other majors hold up. Equities continue to drift higher with the glass half full. The key US data of the week comes today with Retail Sales. Expect volatility to ramp up into the US session.
- Main drivers: Markets remain cautious; GBP jumps on UK unemployment data; Biden virtual meeting with Xi; RBA minutes; US Retail Sales and Industrial Production on the calendar later.
- Cautiously positive markets: mild gains on equities are again being seen in Europe today, although Wall Street is mixed. USD positive bias is hinting again.
- EUR weakens after Lagarde: Lagarde still suggests that it is unlikely that the ECB will have seen the conditions for a rate increase in 2022.
- GBP firms as UK labour market data show encouraging signs: 160,000 jobs were added in October. This was in the first month after the end of the government’s furlough labour support scheme had ended and is encouraging. Unemployment fell to 4.3% (better than 4.4% expected) in September. [GBP positive]
- Biden/Xi virtual meeting between US/China: meeting seems to have been cordial and respectful. Lots talked about but nothing controversial [risk neutral].
- RBA minutes: Governor Lowe still says that the data and forecasts do not warrant an increase in the interest rate in 2022. A 2024 hike remains plausible but could be before if inflation increased faster than expected [AUD neutral].
- Central bank speakers: Lagarde speaks again, along with four Fed speakers:
-ECB President Christine Lagarde at 1610GMT
-FOMC’s Bostic at 1700GMT (2021 voter, hawk)
-FOMC’s Barkin at 1700GMT (2021 voter, mild hawk)
-FOMC’s Harker at 1955GMT (2022 voter, hawk)
-FOMC’s Daly at 2030GMT (2021 voter, dove)
- Economic Data:
-Eurozone Flash GDP at 1000GMT, Q3 flash (second reading) expected to be unrevised at 2.2%
-US Retail Sales at 1330GMT, expected to see headline sales +1.3% MoM (+0.7% in September) and core retail saels +1.3% (+0.8% in September)
-US Industrial Production at 1415GMT, expected to grow by +0.9% MoM in October (-1.3% in September)
Broad outlook: mild risk positive bias, but also USD positive.
- Forex: USD has maintained strength against the EUR, but is broadly consolidating elsewhere. GBP outperforming after UK employment data.
-EUR/USD selling pressure cranked up again yesterday to decisively breakdown once more. We remain bearish but momentum is beginning to look stretched and we would prefer to sell into a technical rally. Resistance now 1.1460/1.1525.
-GBP/USD rally is now testing resistance at 1.3470 and the 6-week downtrend. We still prefer to sell into strength so we are looking for renewed sell signals under 1.3500.
-AUD/USD rebound could be just faltering around the initial resistance of 0.7360/0.7390. A bull failure would be another chance to sell.
- Commodities: precious metals looking to regain upside momentum again, has oil again swung around?
-Gold after a few days of consolidation, gold is looking to break higher again this morning. $1900/$1916 is the next real resistance. We are bullish but prefer to buy into weakness for renewed upside potential. Key breakout support is at $1810/$1834.
-Silver ticking higher this morning within a consolidation of the past few days above $24.80. We still look to buy into supported weakness. Strong breakout support now $24.50/$24.80.
-Brent Crude oil after four days of corrective drift, the market is again picking up off the bottom of the trading range between $80.80/$86.65. We remain neutral within the range.
- Indices: Wall Street has stabilized corrective momentum but is just struggling for momentum, European markets still finding intraday buyers into weakness.
-S&P 500 futures could be settling into a range above support at 4625/4640 and under the all-time high of 4711. Hovering above mid-range pivot support 4660/4665 this morning. We still look to buy supported weakness.
-DAX outlook remains positive amidst the drift into all-time highs. Beginning to look a little stretched on momentum now. If a correction sets in it would be a chance to buy into weakness. Initial support 15,988 with good support 15,755/15,845.
-FTSE 100 Just holding ground now just above the breakout support area 7250/7330. Buyers are still happy to support intraday weakness. We retain our medium-term upside target of 7700.