Recent risk sentiment remains unchanged with European stock futures joining the selloff in Asia amid signs of an oversupply in commodities and as concern grows that stocks have become too expensive. Declines in shares of oil-and-gas firms, chemicals companies and miners all pressured key US stock indexes too yesterday with the Dow Jones Industrial Average falling 0.1%, the S&P 500 down 0.2%, and the Nasdaq declining 0.3%.
The recent movements in FX continued with the euro rising against its major peers. EURUSD has broken through the 1.18 line once again and as highlighted yesterday, brings 1.1880 back into play. EURGBP also continued its move higher yesterday too, initially driven by the market reaction to the lower than expected UK inflation figure coming in at 3.0% versus 3.1%. EURGBP has peaked out for now at .8977 but is nearing a key level, the top end of the range in play since mid-September of .9000/.9020, a level it has failed to break through on two occasions.
We have further key UK data out later this morning in the form of wage data where we expect to see wage growth of just 2.1%. Looking at this versus yesterday’s inflation figure of 3%, helps to highlight a significant issue for the UK economy as real wages continue to decline.
Later in the day, we have a raft of US data. These scheduled releases will be against a backdrop of a weakening US dollar, as uncertainty about US tax reform grows and investors become more sceptical over the likely impact of the White House’s tax agenda next year. We’ve already mentioned above that the US dollar is under pressure this morning versus the euro, but remarkably it’s also lower against the GBP too, as cable trades very close to the 1.32 mark. Looking ahead, attention will turn to US consumer prices and retail sales for clues on the strength of the world’s largest economy. Prices are expected to have increased by 2.0% year on year (down from 2.2% last month).