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European Open Preview – Eyes on US jobs report and Brexit developments; Asian equities rally
December 8, 2017 9:26 amVideo
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Here are the latest developments in global markets:
Major movers: Pound breaks 1.35 as Brexit fear go away; dollar hits fresh highs
After several days of intense talks, the European Commission announced early on Friday that sufficient progress has been made in Brexit talks as both sides reached an agreement on the Irish border issue, flagging that trade talks could begin after a formal approval of the deal at the EU summit starting on December 14. Pound/dollar surged to a four-day high above 1.35 (+0.25%).
The euro dipped to a fresh two-week low of 1.1735 on the back of dollar strength but persisting political uncertainty in Germany also acted as a drag on the currency, with the latest news stating that some members of Merkel’s inner cycle pressed for a minority government despite Merkel’s desire to govern with a stable majority. Besides that, trade data out of Germany failed to provide support as the trade surplus stood below expectations.
Chinese trade figures, though, came in better than expected, with the surplus increasing to a three-month high. Despite encouraging numbers, the aussie inched down to 0.7500 (-0.09%); Australia and China are major trading partners.
The dollar approached the 114 key level, breaking a three-week high of 113.90 (+0.41%). Against a basket of six major currencies, the dollar climbed by 0.20% to a fresh 2-½ -week high of 93.95 (+0.28%).
Day ahead: US jobs report, UK manufacturing output and Canadian housing starts on the agenda; Brexit developments eyed
The UK will see the release of October industrial and manufacturing output figures at 0930 GMT. Data on the nation’s goods trade balance for the same month will be made public at the same time as well.
Housing starts for the month of November out of Canada are due at 1315 GMT, but the main release of the day is the US jobs report scheduled for release at 1330 GMT. The world’s largest economy is expected to have added 200k positions in November, with the unemployment rate anticipated to remain at 4.1%, its lowest since late 2000. Average earnings, which are likely to attract more attention, are projected to grow by 0.3% m/m after October’s zero growth. The US will also see the preliminary December release of the University of Michigan’s survey on consumer sentiment at 1500 GMT.
Following reports on a deal on the Irish border, a key issue holding Brexit talks from progressing, developments on this front will be closely watched. UK PM Theresa May is in Brussels and is expected to be holding meetings with EU officials. A press conference will follow after her meeting with European Commission President Jean-Claude Juncker. Sterling has proved incredibly sensitive to Brexit developments.
Technical Analysis: USDJPY turns bullish above 113
USDJPY rallied above the 113-key level and the exponential moving average lines, resuming its upleg off the 111 area. Positive signals are also given by the RSI which is currently heading higher, exceeding the 50 neutral-perceived level. Note though that the market is overbought in the 4-hour and the 1-hour charts. However, eyes are on nonfarm payrolls today. A disappointing NFP report could push the pair down to test the area between 112-113. Any close below this range could see the bottom of the recent uptrend at 111 come into focus and consequently turn the bias from bullish to bearish. Sharp decreases could also open the scope for a re-test of the 110 area. Alternatively, if the numbers beat expectations leading to a rise, the pair could find resistance at the nine-month high of 114.72.
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