As expected, the UK’s industrial and manufacturing production contracted in January.
Cable remains offered pre-1.2200. The negative trend is picking up momentum for a potential pullback toward the 1.20 level.
The FTSE is better bid on the back of softer sterling. Despite the barrel of WTI consolidating below the $50 level, energy stocks (+0.45%) are better bid in London. Gains could be fragile as New York walks in.
The FTSE rolling index hit 7325p in the overnight trading session, suggesting that traders are testing the downside potential toward the 7300p mark and below. The 50-day moving average (7250p) has so far given a good support to the FTSE. Combined to a softer pound against both the US dollar and the euro, price pullbacks could attract dip-buyers.
Gold miners are having a tough Friday, as the yellow metal trades below $1200 for the first time since end-January. Randgold Resources (-2.24%) and Fresnillo (-2.88%) plunged to the bottom of UK’s 100 index and are expected to remain under pressure as long as the sell-off in global bond markets lingers.Euro better bid Draghi’s comments, DAX trends higher
The euro recovered to 1.0615 against the US dollar amid the European Central Bank (ECB) President Mario Draghi sounded slightly more hawkish than expected. The ECB is expected to reveal a tapering plan in September, if the Eurozone’s political picture is stable and the inflation is on a solid path toward the bank’s 2% mandate target. The single currency took over the 0.87 offers against the pound. The positive breakout could encourage a further rise toward 0.8850/0.8900 area.
The DAX and the CAC firmed at the European open. The DAX holds support at the 12K level, which could encourage a further rise toward the 12100 historical high.
The CAC 40 consolidates gains above the 5K in Paris. Energy stocks (+1.23%) are the major drivers of the positive move. Despite the improved risk appetite, gains in French stocks could remain limited. The market’s hypersensitivity to election polls and breaking news is a major risk moving into the first round of the presidential election due on April 23rd. US labour data could be inconsequential for Fed hawks
The US labour data is the main macro highlight of the day. Released on Wednesday, the solid ADP employment report kept the appetite tight in the US dollar. Although the correlation between the ADP and nonfarm payrolls (NFP) is low, the consensus for today’s NFP is a feasible 200K versus 237K printed a month earlier.
The average hourly earnings are expected to have improved by 0.3% month-on-month, meanwhile the unemployment rate is seen a touch lower at 4.7% compared to 4.8% a month earlier.
Except for a big surprise, the US jobs data will likely have no impact on the Fed expectations. As of today, the markets assess 100% probability for the Fed to raise the interest rates by 25 basis points next week.
The US 10-year yields rose for a tenth consecutive session to 2.62%, a new high in the post-Trump rise, giving little reason to carry traders to use the US dollar as the funding/short leg of their strategy.
The Dow Jones and the S&P500 consolidated recent losses before the jobs data. The rise in the global risk appetite could benefit to the US stocks before the closing bell.
The Dow Jones is called 67 points firmer at $20925 at the US open.Aussie tests 0.75-support against the USD
The sell-off in the Australian sovereign bonds accelerated on the back of sharp headwinds in the US Treasuries before next week’s FOMC meeting. The AU 10-year yields spiked to 2.98% for the first time since mid-2015 and gave a brief relief to the Aussie before the US jobs data.
Although the Australian yields pick up on the back of US reflation trades, the US yields rose much faster. The narrowing the AU-US rate differential keeps many carry traders away from funding their strategies by shorting the higher yielding US dollar. As a result, the AUDUSD retreated to 0.7490 on Thursday and the negative trend gained further momentum. Offers are touted at 0.7545 (200-day moving average) for a re-test of the 100-day moving average, actually standing at 0.7485. Clearing this level should pave the way toward the next target of 0.7450 (Fibonacci’s 50% level on December – February rise). Gold slips below $1200
Gold trended lower for the fifth consecutive session. The yellow metal traded below the $1200 in Asia. Improved US yields are weighing on the sentiment.
A further decline toward the $1180 could be considered on the back of improved US yields.