Financial market research and analysis

With no lead from the US, which was closed for Martin Luther King public holiday, Asian markets dropped lower overnight. The latest report from the IMF confirming the markets’ fears over slowing global growth gave traders few reasons to cheer.

The latest IMF report cut global growth to the slowest level in three years, citing the slowing Chinese economy and Brexit as causes for concern. The fund also pointed to weakness in Japan and the eurozone and warned over the impact of trade tensions. The IMF report comes hot on the heels of China reporting the slowest annual economic growth since 1990.

The organisation predicted that global growth would fall in 2019 to 3.5% from 3.7% in 2019. Whilst IMF managing director, Christine Lagarde didn’t think a recession was around the corner, but she did consider that a sharper slowdown was on the cards.

Concerns over global growth have been worrying traders for a while. The IMF report hits the nail on the head and expresses those concerns in real GDP expectations- terms. The report helped fuel a risk off trading environment, with equities across Asia moving lower. The downbeat sentiment is feeding into Europe where bourses are pointing to a lower start.

The broad risk off sentiment was sending traders in search of safer havens. The Japanese yen strengthened against the dollar, whilst the dollar was trading higher versus a basket of currencies.

Brexit headlines & wage data to drive the pound

The pound moved lower versus the stronger dollar, whilst remaining steady versus the euro as traders digested the latest Brexit headlines. With Theresa May’s Plan B – seemingly nothing more than pushing her Plan A, traders have grown increasingly hopeful that a delay to Article 50 is up next. Labour taking steps to bring the UK closer to a second referendum has so far had little impact on the price of the pound.

Brexit developments aside, pound traders could find some short-term relief in the UK wages data later this morning. Expectations are for wages for have increased at 3.3% in the three months to November, confirming the strongest pay rise in a decade from the previous month. This shows that even with Brexit uncertainties weighing on business and consumer confidence, the UK labour market is solid.

With regular wage growth stronger than the BoE forecast and supportive of inflation, the BoE could be once again be looking to raise interest rates, Brexit dependent, obviously.

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