Markets not keen on a deadlock holiday
The markets were relatively quiet overnight as traders nervously awaited progress on many political fronts. Officials on both sides of the U.S.-China trade talks expressed satisfaction with the progress thus far. The Republicans and Democrats made no progress though, appearing to be as far apart as ever ahead of Friday’s impending government shutdown. Brexit followers enjoyed a respite from the rhetoric overnight although the British pound sunk to monthly lows of 1.2860 following abysmal manufacturing data.
With political news broadly canceling itself out, the U.S. stock markets closed flat with the dollar remaining strong across the board. Gold fell on profit-taking along with oil as the energy markets fretted about slowing growth and over-supply concerns.
The global data calendar is very light today with China new loans this morning the highlight. A weak number could spark some short-term volatility as traders remain sensitive to headlines. Overall the street appears to be in wait-and-see mode.
FX
The U.S. dollar continued to gently strengthen with GBP and EUR both suffering as poor data weighs on both. The EUR fell 50 points to 1.12785, just ahead of crucial daily support at 1.1265. The GBP fell another 100 points overnight to 1.2860 with significant support at 1.2825. The technical picture suggests more pain lies ahead for the GBP as the U.K.’s deadlock holiday seemingly drags on forever.
Other regional currencies will likely follow the Aussie and New Zealand dollars, which moved lower overnight due to their high beta to China. The Thai baht will remain under pressure and sits at 31.45 this morning. This follows the election commission, which came on the back of the King’s advice and barring his sister from running for Prime Minister at the April elections.
Stocks
U.S. stocks had a sideways night with industrials standing out as the best performing sector. The optimism of the trade talks was offset by worries over the government shutdown. Asia will likely have a quiet session as the street awaits news from Beijing.
Gold
Gold fell seven dollars to USD1307.00 per ounce overnight in the face of a stronger US dollar. In the bigger picture, however, this appears to be a short-term move in the absence of other drivers. Gold continues to constructively consolidate its gains in a broader 1,300.00/1,320.00 range as it awaits a clearer political picture.
Oil
WTI and Brent had a volatile U.S. session with both down nearly two percent at one stage before rallying to close almost unchanged. Oil was buffeted initially by a stronger dollar and oversupply fears before profit-taking set in.
WTI closed unchanged at $51.45 with significant support at $51.00 a barrel. Brent closed the worse of the two, down 50 cents at $61.60, reflecting its potential vulnerability to anti-OPEC legislation in the U.S.