The week has started on a cautious note, as traders have digested the European election results and continue to reflect on Friday’s solid US jobs report, says Chris Beauchamp, Chief Market Analyst at online trading platform IG.
FTSE 100 slips in afternoon trading
“Stocks find themselves hit by several worries today. The stellar payrolls report on Friday has dealt a further blow to hopes of a US rate cut, and snap French elections have given traders something else to worry about. Plus, with US CPI and the Fed on the calendar for Wednesday there is little incentive for traders to plunge back in.”
Sentiment holding up well despite macro concerns
“Given the developments of recent days it is perhaps surprising that stock markets have not suffered heavier losses. But a booming US economy is ultimately good for stocks, and the shock of French elections may turn out to be a buying opportunity if Macron’s gamble pays off. Investors should be prepared for the Fed to err on the side of hawkishness this week, but not excessively so, and the bar to further rate hikes is still very high.”
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EUR/USD treads water just above 1.0400 post-US data
Another sign of the good health of the US economy came in response to firm flash US Manufacturing and Services PMIs, which in turn reinforced further the already strong performance of the US Dollar, relegating EUR/USD to the 1.0400 neighbourhood on Friday.
GBP/USD remains depressed near 1.2520 on stronger Dollar
Poor results from the UK docket kept the British pound on the back foot on Thursday, hovering around the low-1.2500s in a context of generalized weakness in the risk-linked galaxy vs. another outstanding day in the Greenback.
Gold keeps the bid bias unchanged near $2,700
Persistent safe haven demand continues to prop up the march north in Gold prices so far on Friday, hitting new two-week tops past the key $2,700 mark per troy ounce despite extra strength in the Greenback and mixed US yields.
Geopolitics back on the radar
Rising tensions between Russia and Ukraine caused renewed unease in the markets this week. Putin signed an amendment to Russian nuclear doctrine, which allows Russia to use nuclear weapons for retaliating against strikes carried out with conventional weapons.
Eurozone PMI sounds the alarm about growth once more
The composite PMI dropped from 50 to 48.1, once more stressing growth concerns for the eurozone. Hard data has actually come in better than expected recently – so ahead of the December meeting, the ECB has to figure out whether this is the PMI crying wolf or whether it should take this signal seriously. We think it’s the latter.
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