Here are the latest developments in global markets:
FOREX: The euro remained around Friday’s lows as investors were worried that tensions between Madrid and Catalonia would escalate after regional elections on Thursday gave a narrow majority to secessionists. The euro stood against the dollar at 1.1851 (-0.19%) while versus the pound it slipped to 0.8856 (-0.05%) after final British Q3 GDP growth readings came in higher than expected on a yearly basis. Pound/dollar approached the 1.34 key level in the wake of the data but soon fell back to 1.3380 (-0.12%). The aversion of a government shutdown in the US on late Thursday and the passage of the tax overhaul continued to underpin the dollar, with the dollar index trading near the day’s highs at 93.37. Dollar/yen was moving sideways around 113.36 and dollar/loonie approached yesterday’s lows at 1.2703. The aussie was on track to hit a fresh one-month high at 0.7718 (+0.23%).
STOCKS: Political noise in Catalonia dragged European stocks on Friday, sending the Spanish IBEX 35 lower by 1.13% at 1030 GMT. The blue chips STOXX 50 declined by 0.13% on the back of weaker financial shares, the German DAX 40 retreated by 0.17% and the French CAC 40 was down by 0.25% weighed by telecommunications.
COMMODITIES: Oil prices retreated from two-year highs on expectations of the Forties pipeline reopening probably in January and on concerns over rising US output. However, remarks by the Russian energy minister on Friday stating that supply cuts might be extended beyond 2018 provided some support to the market. Brent fell by 0.15% to $64.81 per barrel and WTI crude pulled back by 0.33% to $58.13. Gold edged up by 0.10% to $1,268.60 per ounce.
Day ahead: US PCE inflation & Canadian GDP awaited; Catalonia attracts attention
With traders breaking up for Christmas holiday and the UK markets operating partially, the coming session is expected to be quieter.
However, in Catalonia, Thursday’s regional elections which surprisingly gave a slim majority to the pro-independence parties are said to prolong political tensions in Spain and therefore hit sentiment for the euro. Recall that the Spanish Prime Minister, Mariano Rajoy, called the polls in October after he took control of the region to prevent a declaration of independence. Now, secessionists parties have enough seats to reassemble the parliament and potentially agree on a new coalition.
In the rest of the day, the US and Canada will report on economic indicators. At 1330 GMT, the Bureau of Economic analysis will publish readings on the core PCE price index – the Fed’s preferred inflation measure. Expectations are for the index to inch up by 0.1 percentage points to 1.5% y/y in November, but the dollar might not react much given that the Fed still expects to raise rates three times in 2018. Moreover, since the US tax story is almost complete, markets feel more confident in the performance of the US economy.
Readings on the US personal spending and personal income as well as on durable goods orders, new home sales and University of Michigan consumer sentiment will be also be released during the day.
Meanwhile, the Canadian GDP growth figures might bring some volatility to the loonie as the Statistics Canada provides final readings only, unlike to its US counterpart which also gives early predictions. Analysts forecast the Canadian economy to grow at September’s pace at 0.2% m/m in October.
In energy markets, investors will look forward to the weekly Baker Hughes oil rig counts to give an indication of the US oil supply.
