Financial market research and analysis

The Dow realised its fifth straight week of gained on Friday, supported by strong US corporate earnings and the reopening of the US government, at least for now. There is little doubt that the longest shutdown in US history was causing damage to the economy so the fact that both sides are talking once again can only be a plus for sentiment. With risk back on the table, Faang’s were noticeably back in demand with Apple jumping an impressive 3.3%. Safer havens such as the Japanese yen and the dollar fell lower.

The positivity failed to spill into Asia at the start of the new week, where stocks experienced a mix session overnight. European futures & US futures are pointing to a lower start. US – China trade relations will remain under the spot light, with President Xi’s top economic aid travelling to Washington on Wednesday. Reports regarding trade developments have been mixed, providing traders little solid evidence with which to run the rally higher. Without a deal agreed by the March 1st deadline, the US could lift tariffs on Chinese goods from 10% to 25%. The markets will keep this ever-closer deadline in mind as the two sides meet this week. Pressure is certainly ramping up for a deal to be achieved and when the pressure is on, volatility in stocks often increases.

US Data & FOMC

The dollar is in for a busy week. With the US government open for business, US economic data will start to flow again. After a month of next to no data traders will be keen to see the impact of the shutdown on the figures being released. GDP for the fourth quarter is first up.

The dollar will remain under the spotlight as the Fed are due to give their monetary policy decision on Wednesday. No change is expected. However, investors will be watching closely for further evidence of a more cautious Fed. A more dovish tone from Powell and Fed policymakers over recent months has taken its toll on demand for the dollar and could continue to do so this week.

Pound Steady Ahead of Tuesday’s Key Parliament Vote

The pound hit hit $1.32 on Friday after rallying for its fifth straight week versus the dollar. Investors are growing in certainty that the UK will avoid a no deal Brexit. The pound was stable in early trade on Monday, despite the Irish PM opposing a time limit of the Irish backstop and ahead of a key vote in Parliament on Tuesday.  As the game of chicken intensifies, the pound is expected to see more volatility this week.

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