Financial market research and analysis

The pound (+0.42%) gained against the US dollar in London despite the decent political pressure. According to latest news, PM Theresa May could reshuffle her cabinet and exclude Foreign Secretary Boris Johnson. May’s disastrous speech at the Tory party conference last week has successfully caricaturized the dull atmosphere at the heart of the Conservatives and the way the Brexit negotiations have been handled so far. Talks on cabinet reshuffle may have been a light hope for pound traders on Monday morning, although the reshuffle would not happen before May’s October 19/20 meeting with the European leaders in Brussels, according to the Sunday Times.

The rebound in pound could run into offers near the 50-day moving average (1.3145) and 1.3176 (minor 23.6% retracement on September-October decline).

The FTSE 100 stocks opened downbeat on stronger pound. Mining (-0.54%) and energy stocks (-0.12%) failed to attract buyers despite a solid session in the industrial metals market in Asia.


European stocks open on a positive note

German industrial production expanded 2.6% month-on-month in August versus 0.9% expected by analysts and 0.0% printed a month earlier. This equals to a solid 4.7% expansion on yearly basis. The EURUSD consolidates above the 100-day moving average (1.1676), if broken could pave the way toward a key mid-term support of 1.1509 (major 38.2% retrace on April – September rise). Short-term offers are touted at the 200-hour moving average (1.1752).

The European stock markets opened the week on a positive note. All IBEX sectors opened in the positive territory, after nearly a million pro-unity protesters marched in Barcelona on Sunday. Though, the risk of a unilateral declaration of Catalan independence prevails and could further harm the Spanish markets if realized.


US closed, USD mixed

The US dollar is mixed against the G10 complex. The US and Canada will be closed due to bank holiday, hinting at low trading volumes later in Monday's session. Many Federal Reserve (Fed) members will speak throughout the week and some of their comments could influence the market valuation of the US stocks and the dollar. The Fed meeting minutes are due on Wednesday.

The US 10-year yields advanced past 2.35% on hawkish Fed expectations. Presently, the probability of a December rate hike stands at 80.2%, versus circa 20% a month earlier.


Lira plunges on US tensions

Turkish lira plunged as the US and Turkey mutually suspended non-immigrant visas after a Turkish national working in the US consulate was arrested for involvement in July 2016 military coup.

The EURTRY traded at 4.5211 for the first time and the USDTRY hit 3.8533. The lira will likely remain vulnerable due to political risks. The key resistance against the US dollar stands at 3.9415, the all-time high hit in January 2017.


Gold rebounds from two-month low

Gold rebounded after trading at $1’260, a two-month low. Tensions with North Korea continues as the US President Trump hinted at an eventual military action by tweeting ‘only one thing will work’. The 100-day moving average ($1’273) could provide support to the gold recovery.


Oil buyers are hardly convinced by ‘extraordinary measures’

WTI (+0.51%) and Brent crude (+0.09%) gained slightly as OPEC’s Secretary General Barkindo said the OPEC and its allies could take extraordinary measures in 2018 to rebalance the oil market. There are ongoing talks among major producers before the Vienna meeting due on November 30th. Brent crude holds the ground above the $55/barrel level although the positive trend appears to lose momentum. In the US, Hurricane Nate interrupted 93% of the US Gulf production over the weekend, yet the impact could remain short-lived according to experts and the WTI crude could remain offered below the $50 per barrel.


Some colour out of Asia

Japan was closed due to bank holiday; Chinese mainland stocks were upbeat after traders returned from the one-week Mid-Autumn festival break.

Shanghai’s Composite gained despite the weaker-than-expected Chinese manufacturing and services PMI in September. The AUDUSD opened slightly stronger as Chinese traders pushed metals higher as they returned from holidays, yet failed to consolidate in the positive territory. Copper (+1.70%), zinc (3.13%) and steel rebar (+3.61%) futures traded higher in Shanghai.

The kiwi (-0.75%) was the leading G10 loser as the ruling National Party and its Labour opposition both collected enough support to form a coalition, a situation which increases the political uncertainty and keeps the FX traders away from the kiwi.


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