Financial market research and analysis

US markets showed signs of life once again on Thursday, moving higher and recovering after a couple of down sessions. The tech heavy Nasdaq led the charge northwards, with the likes of Facebook, Google parent Alphabet and Apple gaining between 1.4% - 2.4% each.

FAANG’s back in favour

Tech stocks have been a big story this week, selling off early in the week, only to push higher towards the week end. Investors had considered that that this sector would receive less benefit from the US tax reform bill. As a result, investors sold out of tech stocks and notably out of FAANG (Facebook, Amazon, Apple, Netflix and Google owner Alphabet) stocks. On reflection the selloff appeared overdone. These stocks continue to see strong earnings growth, so it was only going to take a small dip in the share price to attract a new batch of investors.

Dollar holds gains on stopgap spending bill & ahead of NFP

The dollar is managing to hold onto gains, cheering progress of the tax reform bill and news that Congress cleared a stopgap spending bill. This successfully staves off a government shutdown and essentially kicks the can down a two-week road, until December 22.

The market will now focus on fresh dollar price action drivers. These will come in the form of the non-farm payroll report later today and next week’s widely expected interest rate rise from the Federal Reserve. As we have moved closer to these events, the dollar has strengthened. After bouncing off 92.55 last Friday, the dollar index now is on its fifth straight positive session, with 94.00 firmly in its sights.

The breakdown of gold has been an increasingly noticeable impact of the recent dollar rally. The price of gold tumbled to a 4-month low, after dropping over 2.3% this week as sentiment improves and the risk on trade is firmly in place. Any signs of a Santa rally in equities is an indication of risk on sentiment, which could intensify losses in gold.

Is the Brexit Deal Finally Done?

If reports are to be believed, Theresa May is finalizing details of the Brexit bill, after agreeing a deal over the Irish border. She is due to meet the EU’S Juncker and Tusk with the latter due to make a Brexit statement early today.

The pound hit a five-week high versus the euro and closed 0.6% higher versus the dollar on Thursday. Should May close the deal in Brussels today, the pound could see more upside early on, heading for $1.35, before potentially pushing on towards is recent high of $1.3549. Although the release of the NFP could hinder progress post $1.35

The UK economic calendar finally offers traders some influential data points to sink their teeth into, such as manufacturing and industrial production figures. However, these are expected to be completely overshadowed by Brexit developments.