The S&P yesterday suffered one of its biggest declines since August but that was before the cash market even opened and the index rallied from a .75% decline and eventually closed the day flat, with futures now pointing to 0.5% higher open today. That’s the world we live in these days, and while almost everyone is nervous with the value of equities, in the US particularly but globally as well, they continue to grind higher.
Today marks the 30th anniversary of the 1987 crash which saw markets plummet over 27% and while we continue to hear people warning of an impending crash markets show no signs of stopping their advance. In the currency world, the euro was an outperformer on the day, pushing EURUSD back above 1.1800, while EURGBP traded to highs around .9022 before selling kicked in and the pair dropped back below the .9000 level once more. Sterling was just generally weaker and has been since Mark Carney spoke on Wednesday but yesterday’s weaker retails sales figures did not help and GBPUSD dropped back below 1.3100 but stopped short of last Friday’s low print.
The euro found itself in some demand yesterday as Spanish PM Rajoy rescinded Catalonia’s self-rule however markets overlooked the risks and the single currency pressed higher. Euro could see some weakness creep back in as talks continue and the region remains fractious. Movement in the euro over the coming week may well be limited as markets await next Thursday’s ECB meeting. This is the last ECB meeting before December when the current round of QE purchases of €60bln is set to end. We continue to highlight improvements in Eurozone data which should see the ECB look to scale back easing, however at the same time they have been very keen to point out that the region remains exposed to downside risks and it’s the aggressive easing position that the ECB have taken that has helped the region bottom out and the risk is that the removal of stimulus too soon could quite quickly put pressure back on.
There’s not much in the way of data due today so we’ll focus on the technical for the euro. Ranges remain in play as they have been, EURUSD finds upside resistance at 1.1750/70, while support downside towards 1.1732 should hold moves lower today. EURGBP keeps finding sellers from .9000/.9030 while any move towards .8880/70 area proves some decent support for now.