Markets flat ahead of plan B speech
It’s expected to be a relatively slow start to the week, with the extended weekend in the US weighing on volumes as the country observes the Martin Luther King Jr day bank holiday.
European indices are mostly eyeing a pretty flat open, with markets taking little direction from Asia overnight and potentially anticipating a relatively uneventful day overall. Of course, with the Brexit process having suddenly accelerated – a little over two months until exit day – traders are going to be constantly on high alert to breaking news and speculation.
Theresa May will present her plan B to parliament this afternoon following the humiliating defeat of her deal last week. The pound has been holding up quite well so far, despite all the theatre in parliament, but this has less to do with what May is achieving and more to do with the efforts of other MPs to take no deal off the table. This is the currently the greatest risk for the currency.
Gold flat at the start of the week
Gold is trading rather flat at the start of the week, in line with the movements we’ve seen in the dollar. A pull back on Friday came on the back of another jump in the greenback and as equity markets continued to push higher, with investor sentiment continuing to improve on encouraging progress in US and China trade talks.
Gold has been very resilient over the last week and a half, constantly threatening to break above $1,300, despite the fact that the dollar had been making steady gains and the risk environment is improving – not ideal for a traditional safe haven asset. Despite this, I remain bullish on the yellow metal but a break above this key resistance zone may just take a little longer, with $1,260 offering potential support if $1,280 gives way.
Oil edging higher even as Chinese data confirms slowest growth since 1990
Brent and WTI are continuing to creep higher at the start of the week, with the improved risk environment being an important tailwind for prices. The rally does appear to be losing some momentum as prices approach important resistance zones – $65 in Brent and $55 in WTI – which is understandable given that we’ve already seen a roughly 25% bounce since Christmas.
Data released overnight confirmed that the Chinese economy grew at its slowest pace in 28 years, a further worrying sign that an already decelerating economy is feeling the pain of a trade war with the US. This is unlikely to ease at the start of the year, although talks do appear to be progressing. China has reportedly presented a plan to increase imports over a six year period to reduce the trade imbalance, something that if enforced could be an important win for the Trump administration ahead of his re-election bid next year.
