Plenty of uncertainty dominates the markets

Jens Peter Sørensen Danske Bank A/S

Market movers today

There is pressure on European financial markets given the weak economic growth data from Germany, Brexit and the budget clash between Italy and the EU.
Yesterday, PM Theresa May got support for her Brexit deal from the cabinet as expected. She said it was a 'collective' not a 'unanimous' decision, suggesting that some ministers were against the deal.
Today, there is a string of US data due - US retail sales that have been robust for a long time on the back of a strong labour market and tax cuts earlier this year. We expect it to stay decent as household fundamentals are still strong. The two regional surveys, Empire Index and Philadelphia Fed, will give the first indication of manufacturing confidence in October. Recently, ISM manufacturing has softened and in line with consensus, we expect surveys to moderate further from the quite high levels reached earlier this year. Initial jobless claims and import prices are also due for release today.
In Scandi, Swedish unemployment and the Norwegian trade balance are being released.

Selected market news

PM Theresa May got support for her Brexit deal from the Cabinet, but it was not a 'unanimous' decision, suggesting that some ministers were against it. The real test is still whether it can pass the House of Commons, where a vote is expected in mid-December.

Markets are still uncertain, which was reflected in the modest move in GBP yesterday. Hence, we need more confirmation on the deal before we can see GBP strengthening.

Asian equity markets were also mixed this morning after a slide in US equity markets late yesterday. The negative reaction in the US equity markets was due to Fed Chair Powell indicating that the recent volatility in the markets would NOT change US monetary policy in a Q&A session very late yesterday evening.

He indicated that equity market volatility was only one of many factors that the Fed was considering when setting rates. His comments also confirmed the expectations of a December hike from the Fed.

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Author

Jens Peter Sørensen

Danske Bank A/S

EUR/USD remains bid, focus stays on 1.1900

EUR/USD has broken its two-day run of losses and is ticking modestly higher on Thursday, hovering around the 1.1880 area as the US Dollar struggles to find clear direction. Weekly Initial Jobless Claims rose more than expected, taking a bit of shine off the Greenback, but markets are largely in wait-and-see mode ahead of Friday’s US CPI release.

GBP/USD sticks to the bid bias, still below 1.3700

GBP/USD is trading with decent gains around 1.3650 on Thursday. Indeed, Cable is attempting to shake off the weakness seen earlier in the week amid another choppy session for the Greenback, while a run of disappointing UK data has so far failed to derail the pair’s tentative recovery.

Gold recedes slightly, trades below $5,100

Gold remains stuck in choppy trade on Thursday, deflating marginally just below the $5,100 mark per troy ounce as the US Dollar drifts without a clear trend. Softer US Treasury yields across the curve are offering some support, but with markets treading carefully ahead of Friday’s US CPI release, conviction remains limited and price action continues to look hesitant.