The rally in global stocks took a bit of a breather yesterday with US equity indices closing flat or marginally higher on the day. US Treasury yields largely fell and USD continued to drift lower with the DXY (USD index) dropping to the lowest level in three years.
Commodities had a positive day led by natural gas futures which jumped by around 5% as colder than expected weather in the US spurred demand.
GBP continued to trade firmly yesterday despite a brief dip following comments from the EU’s chief Brexit negotiator Barnier indicating that the UK still has to come up with a solution to the Irish border. GBPUSD climbed back above 1.4000 overnight mainly as a result of broad based USD weakness and EURGBP held below the recent support level of 0.8800.
GBPUSD support now comes in at 1.3900 ahead of 1.3800 with resistance at 1.4100. In EURGBP, support is found at 0.8690 with 0.8800 acting as short-term resistance.
Focus today will be on the UK labour market report for November released at 9.30. Barclays Research expects real wage growth to remain in negative territory with nominal average weekly earnings growth expected to come in at 2.5% whilst the unemployment rate is likely to remain unchanged at 4.3%.
This morning we will also get Flash Euro area PMIs where Barclays Research expect a further improvement in business confidence. Continued strength here is likely to draw attention to the ECB’s press conference scheduled for tomorrow.