Financial Market Research and Analysis

Our analysts have their fingers on the pulse of the world's financial market news.

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UK banks lead gains pre-results

The US dollar started the week stronger across the board, yet pared losses against the commodity currencies into the European open. The Aussie (+0.32%), the Kiwi (+0.11%), Norwegian Krone (+0.14%), Swedish Krona (+0.04%) and the Loonie (+0.03%) reversed losses, as the WTI held support above the $50 handle.

 

Nikkei gained 0.29% as the preliminary manufacturing PMI in Japan hinted at faster activity in October, while the trade surplus printed a significantly better-than-expected result in September, 498.3 billion yen, versus 366.1 billion yen expected and -18.7 billion yen a month before. The yen gave a limited reaction however, trading at a 20 pips range of 103.82 – 104.00 in Tokyo. The failure to gain positive momentum sent the USDJPY slightly lower at the European open. We remain neutral on the lack of appetite on both directions.

 

The euro-yen remains below its 50 and 100-day moving averages (113.30), and could further extend losses to 112.60 (August double bottom) and 111.63 (Sep 25th low), given the broad based euro weakness post the ECB meeting.

 

Against the US dollar, the euro extended losses to 1.0860 and stepped into the oversold market as the 30-day RSI hit 25.9. A minor correction could be on the menu this week, yet clearly, the 1.10 handle is a good candidate for traders seeking to strengthen their euro short positions in the mid-term. Option barriers abound pre-1.10.

 

The UK’s banking sector will be under close watch this week as Britain’s major banks are due to report results this week, and expectations are mixed. Financials (+1.49%) are leading gains in London, although a challenging political environment, due to Brexit, could jeopardise any improvement in banks’ earnings.

 

According to a survey on Bloomberg;

Barclays (+0.90%): buy/hold/sell: 44%/ 44%/ 12%

RBS (-0.32%): buy/hold/sell: 12%/ 46%/ 42%

HSBC (+0.45%): buy/hold/sell: 19%/ 52%/ 29%

Standard Chartered (+0.95%): buy/hold/sell: 26%/ 33%/ 41%

Lloyds (+1.16%): buy/hold/sell: 43%/ 32%/ 25%