Yesterday’s better than expected ADP report from the United States may have had an effect of the FX market. The Single Currency and GBP have climbed in value again versus the USD. Sterling is testing nearly one year highs. Both the ECB and BoE will announce their interest rate decisions today but no changes are expected. Yesterday’s Retail Sales numbers from Europe were worse than expected and the Services PMI figures from the U.K. proved disappointing. The U.S. will release Preliminary GDP figures this afternoon and coupled with weekly Unemployment Claims that will be published at the same time could make for interesting short-term sentiment.
Tomorrow the Non-Farm Employment Change numbers will be released and it will prove more than interesting to see if the U.S. government numbers can also turn in better numbers than their estimates like yesterday’s ADP statistics. If the U.S. economy hints at ‘improvement’ investors may find themselves taking a cautious approach to equities if they feel that the Federal Reserve will actually take a more aggressive tapering stance. In essence the markets remain fairly contrarian and hard to decipher. Why is the USD getting weaker if investors think the Fed will actually tighten its money policy? And if they do not think that money policy is going to get more conservative, why are equities running into resistance recently? Which raises the question and possibility that what we are seeing are broad markets that are largely being effected by a technical outlook and a profit taking mode before the calendar year ends.
Gold climbed in price yesterday after hovering over important support levels. Having one day of gains however is no guarantee of future prospects. The precious metal has been in a bear market for nearly a year and for those looking to traverse the waters of Gold solid risk management should be in place. As of this morning Gold is near 1234.00 USD.
While Central Banks will be the focus today as ‘talking heads’ discuss the prospects of the BoE possibly be the first among the major institutions to start a ‘hard’ tightening sometime in 2015 with an interest rate hike. The crux of the situation remains less than glittering for growth outlooks. While the U.K. may in fact have seen some sun shine and good management results fiscally, Europe remain under dark clouds, and the U.S. has entered an important holiday shopping season in which its consumers need to prove that they have the confidence to spend. The major economies including the U.K. continue to face some hurdles in Digital Markets Advisor’s opinion.