A slightly weaker US dollar and a rebound in commodity prices has helped stock markets rebound over the last 24 hours and ahead of tonight’s final debate between Presidential hopefuls Hillary Clinton and Donald Trump. With Hillary Clinton starting to open up a significant lead against the under fire Mr Trump it seems that the odds of her winning the White House have increased significantly over the past few days, as support starts to peel away from the Republican candidate.
Asia markets have had a fairly quiet session overnight with the latest Chinese economic data barely causing a ripple.
The latest Chinese Q3 GDP numbers appear to show the Chinese economy growing at a steady rate of 6.7%, unchanged from the previous two quarters, a remarkably consistent performance from such a large economy, but in line with expectations.
While the recent trade numbers appear to show signs of slowing global demand the latest September retail sales numbers show that domestic consumption appears to be holding up fairly well, coming in at 10.7%, a slight increase from 10.6%.
Industrial production was a different story however slipping back coming in worse at 6.1%, down from 6.3%, and well short of expectations of 6.4%.
China’s economy has been at the forefront of investor concerns for some time now, and while the continued weakness in the currency that was causing market palpitations at the beginning of this year appears to have passed, the worries about how accurate a picture these numbers are painting hasn’t. Debt levels continue to remain elevated amidst significant uncertainty about how well the economy really is doing.
We turn back to the UK later this morning and the latest wages and employment data. Having seen inflation rise to its highest levels in two years it would appear that the goldilocks scenario of headline inflation coming in below the rate of wages growth, that has been the case since the end of 2014 may well be coming to an end.
The evidence of this came with UK CPI hit 1% for September yesterday, as retail prices pushed back above the 2% level for the first time since 2014, with clothes and energy prices leading the rises.
While the Office for National Statistics reported that the recent decline in the pound didn’t appear to be filtering through into the headline numbers quite yet, we do know that the deflationary effects of the lower oil price are already starting to drop out of the numbers, and will continue to do so over the next few months, and in so doing start to exert upwards pressure on prices in the weeks ahead.
Today’s average weekly earnings data (ex-bonus) for the 3 months to August is expected to continue to outpace the return of rising prices, but it could well be a last hurrah as we head towards the end of the year, with expectations are for a rise of 2.1%, unchanged from July.
The latest ILO unemployment rate for August is also expected to remain unchanged at 4.9%.
EURUSD – struggling to rally much beyond the 1.1060 area for the moment with support remaining at the 1.0950 area. We need to push back through the 1.1100 to stabilise, or risk a break below 1.0950 towards the 1.0800 area.
GBPUSD – yesterday’s move through the 1.2300 area could have the potential to see further gains towards the previous peaks just below 1.2500. A move back below 1.2260 could well undermine that scenario and argue for a move back towards the recent lows at 1.2100. A break below the 1.2000 area has the potential to open up the previous flash crash lows at 1.1950, and possibly lower.
EURGBP – having broken back below the 0.8960 area we could well see further losses towards the 0.8780 area. This would come about on a break below the 0.8900 area. Any rebounds are likely to find resistance at the 0.8960 area, and the highs this week at 0.9080.
USDJPY – continues to find progress beyond the 104.30 area difficult to sustain for now which raises the risk of a move back towards the 103.20 area. A sustained move through 104.50 could well see a move towards 105.70.
