GBP higher on Court Ruling, BoE – US October Job Report in Focus today
In the aftermath of the uneventful FOMC on Wednesday, stock markets took another leg lower. The MSCO World index, which measures global equity performance amongst 23 developed markets, down for the 8th day in a row and closed below trend support from 2016 lows yesterday. In Europe, only the Spanish IBEX kept in positive, but rest of mainland Europe was in negative. US followed lower with the S&P500 down 0.4% with Healthcare and Consumer Non-cyclicals being the worst performers. Gold took another leg higher as investors are betting on safe haven assets ahead of the US election, which again is showing growing concerns for the democrats.
MSCI World Daily (Source: Reuters)
The UK came into focus on Thursday on back of the UK High Court ruling that the government has to pass the Brexit vote through parliament on the triggering of Article 50 of the Lisbon Treaty which would initiate the UK leaving the European Union. The government appealed the verdict and now a hearing is scheduled in early December. This triggered bids in the Sterling and Cable shot higher, breaking above trend resistance with next resistance at the 1.25-level. A close above and the path to 1.26 is opened up on a technical level. BoE did act as expected with regards to interest rates and the QE program, but upgraded growth forecasts and mentioning potentially higher inflation, which gave additional support to the Sterling and sent UK stock markets on the offer. The UK High Court ruling could delay the triggering of article 50 and add the uncertainty concerning the EU/UK relationship and UK economy.
GBPUSD vs. FTSE100 Daily (Source: Reuters)
This morning, Aussie Retail Sales came out beating expectations, sending AUDUSD higher for the fifth day in a row. The Australian economy is showing sound fundamentals and with the RBA being accommodative, we could see additional gains. Q3 Retail Sales did come out lower than expected though. Technically, AUDUSD has been stuck in a wedge for quite a while, so soon something has to give and the US election is likely to hold the key.
European Stocks have opened in negative on back of a negative Asian session, and fairly strong and expansionary Markit PMI indices for Services and Composite have not been able to change the sentiment. Euro Zone Producer Prices came out better than expected for September, but no real market impact.
In the afternoon, focus will change towards the US October Job Report, which is expected to reveal a Nonfarm Payrolls figure of 175k vs. 156k in September and an improving Unemployment Rate of 0.1%pp to 4.9%, while the Average Earnings MoM are expected to increase 0.1%pp to 0.3%.
At the same time as the US data release, Canada is releasing employment data as well, where the unemployment rate is expected unchanged at 7% while October Employment Change is expected at -10k from +67.2k in September.
Should the figures prove to come out in opposite directions, we could see a potential double-whammy for USD/CAD. The pair has despite a weaker US Dollar traded higher on back of a drop in the oil price as a result of the build in inventories. The pair has been in an uptrend since May this year and should the current them continue with a weakening oil price, there should be room for further upside. Bank of Canada has also turned slightly dovish, which adds to the setup. However, the key risk for the future path will be the US election.
Have a nice weekend.
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