Financial market research and analysis

Wall Street charged higher overnight, booking its fourth straight day of gains. A more dovish Fed following the release of the FOMC minutes boosted risk appetite, whilst dragging the dollar lower. However the effect was short lived with Asian shares moving lower. There is just no concrete evidence that US - China trade talks actually went well.

The dollar was extending losses in early trade following more dovish than expected FOMC minutes. The minutes showed that officials were more cautious than the post FOMC statement showed. The message from the minutes was that Fed officials are prepared to put hikes on hold until there was more clarity on risks to global growth, which could impact on the US economy. The cautious tone was driven home by Fed Official Bostic, who echoed the call for patience and said only one rate rise would be required this year, as opposed to the two that the dot plot indicates.

Pound Lower As General Election Fears Rise

Sticking with currencies, the pound was broadly weaker in the previous session (except versus the dollar) as traders reacted to Brexit developments. Theresa May being defeated twice in as many days does not bode well for the vote on Tuesday. Whilst MPs are using every tactic in their power to avoid a no deal Brexit, the uncertainty of what could come next once Theresa May’s deal fails is sapping demand for sterling.

Opposition leader Jeremy Corbyn has called for a general election should Theresa May fail to get her deal approved in Parliament on Tuesday. The prospect of a general election is not favourable for the pound, more so, a Corbyn government is an economic disaster. 

BRC sales record worst performance since 2008

This week is a big week for UK retailers including supermarkets. Unfortunately the stats haven’t been as rosy as investors had hoped. Weaker updates from Morrisons and Sainsbury's don’t bode well for the rest of this sector; a sector that relies so heavily on a strong spending consumer.

Retailers could be under pressure in early trade after data from the British Retail Consortium showed that British retailers suffered their worst Christmas trading since the middle of the financial crisis. Not even heavy price slashing has been enough to grab the attention of buyers. The UK consumer remains under pressure and opted to not splash out over Christmas as in previous years as Brexit pressure starts to bite. As a result, retail sales growth stalled for the first time is 28 months.  This is yet further evidence that the negative impact of Brexit uncertainty is seeping into the economy for all directions.

Oil enters bull market

Oil entered a bull market charging through $52 the barrel after gaining more than 20% since hitting a Nadir on Christmas Eve. Production cuts, trade talk optimism resulting in a brighter economic outlook added to oils momentum. Sentiment has gone from one extreme to another in a very short space of time.

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