It was a quiet session in Europe yesterday as some traders sat on the fence while the US stock markets were closed on account of Presidents Day. It is common for European markets to meander whenever their US counterparts are closed.
US-China trade talks are set to continue this week. Last week, we heard that some progress was being made, and dealers are still hopeful. Both sides seem content to let this drag on, but traders are viewing the fact that the negotiations are taking place as a sign that things are positive. Tensions rose between the two sides after Beijing accused the US of stoking fears over cybersecurity, and Asian stocks are mixed overnight.
Some European car makers lost ground yesterday as traders were fearful the US will slap tariffs on vehicles and auto parts. The US commerce department produced a report on whether or not to go down the route of tariffs. Nothing has been declared so far. Some commentators have warned that tariffs could hurt the US consumer and auto sector in the form of higher prices, but President Trump might use them as a bargaining chip against the EU.
The greenback retreated a little yesterday after having a strong run the previous week. The dip in the dollar helped gold and palladium hit a 10 month and record high respectively. Palladium is still benefitting from last week’s Johnson Matthey (LON:JMAT) report, that demand will outstrip supply this year.
Oil crept higher too yesterday as traders bought the energy in relation to fears about supply. OPEC production cuts are starting to bite, and the oil market reached a level not seen since November. The energy market, like stocks has been buoyed by the prospect of a US-China trade deal.
Sterling will be in focus today as the UK will release the latest unemployment and average earnings figures at 9.30am (UK time). The jobless rate is tipped to hold steady at 4%, and the average earnings rate excluding bonuses are expected to be 3.4%, which would be an improvement on the precious reading of 3.3%. The UK CPI rate recently dipped to 1.8%, and seeing as wages have been rising in recent months, British workers are getting a real increase in wages.
At 10am (UK time) the German ZEW economic sentiment report will be announced, and the consensus estimate is -14, which would be an improvement on the -15 reading in January.
EUR/USD – has been broadly pushing lower since early January, and if the negative move continues it might retest the 1.1216 area. Resistance might be found at 1.1400 or 1.1500.
GBP/USD – has been driving lower since late January, and if it holds below the 200-day moving average at 1.3000, the bearish move should continue. The 1.2710 area might act as support. A rally might run into resistance at 1.3200.
EUR/GBP – has been bouncing back since late January, and a break above the 200-day moving average at 0.8863 might bring 0.9000 into play. If the market turns over again, it might retest the 0.8620 area.
USD/JPY – has been on the rise since early January, and if the bullish move continues it might target the 112.00 area. A break below 109.50, might bring 108.50 into play.
FTSE 100 is expected to open 2 points higher at 7221
DAX is expected to open 4 points higher at 11,303
CAC 40 is expected to open 6 points higher at 5,174
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