Market correction but continued recovery

Danske Research Team Danske Bank A/S

Market Movers ahead

Minutes from the October ECB meeting could well provide clues as to what will happen after September next year when the current QE programme is set to end.
The minutes from the most recent FOMC meeting are less likely to be interesting.
PMIs in the euro area are likely to show further increases although the stronger EUR weighs on businesses, and Markit PMIs for the US are expected to increase as they are catching up to ISM numbers.
The Swedish Riksbank's financial stability report is likely to draw attention, given the turnaround in the housing market.
Survey data could point to a rebound in oil investments in Norway next year.

Global macro and market themes

In the equity market, we have seen a correction from stretched levels but it should prove temporary.
The likelihood of US tax cuts has increased and will remain a market theme for the rest of the year.
Any dips in EUR/USD should be shallow and short-lived and we expect it to move higher again next year.
We think risks to our outlook for yields over the next couple of months have now become more symmetric and that the downside potential for yields should not be neglected.

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Danske Research Team

Danske Bank A/S

Research is part of Danske Bank Markets and operate as Danske Bank's research department. The department monitors financial markets and economic trends of relevance to Danske Bank Markets and its clients.

EUR/USD holds firm above 1.1900 as US NFP looms

EUR/USD holds its upbeat momentum above 1.1900 in the European trading hours on Wednesday, helped by a broadly weaker US Dollar. Markets could turn cautious later in the day as the delayed US employment report for January will takes center stage.

GBP/USD remains above nine-day EMA near 1.3650

GBP/USD recovers its recent losses from the previous session, trading around 1.3680 during the European hours on Wednesday. The technical analysis of the daily chart indicates a sustained bullish bias, as the pair trades within an ascending channel pattern.

Gold sticks to gains near $5,050 as focus shifts to US NFP

Gold holds moderate gains near the $5,050 level in the European session on Wednesday, reversing a part of the previous day's modest losses amid dovish US Federal Reserve-inspired US Dollar weakness. This, in turn, is seen as a key factor acting as a tailwind for the non-yielding yellow metal ahead of the critical US NFP release.

US Nonfarm Payrolls expected to show modest job gains in January

The United States Bureau of Labor Statistics will release the delayed Nonfarm Payrolls data for January on Wednesday at 13:30 GMT. Investors expect NFP to rise by 70K following the 50K increase recorded in December.

S&P 500 at 7,000 is a valuation test, not a liquidity problem

The rebound from last week’s drawdown never quite shook the sense that it was being supported by borrowed conviction. The S&P 500 once again tested near the 7,000 level (6,986 as the high watermark) and failed, despite a macro backdrop that would normally be interpreted as supportive of risk.

Bitcoin price slips below $67,000 ahead of US Nonfarm Payrolls data

Bitcoin price extends losses, and trades below the lower consolidating boundary at $67,300 at the time of writing. A firm close below this level could trigger a deeper correction for BTC. Despite the weakness in price action, institutional demand shows signs of support, recording mild inflows in ETFs so far this week.