Market Review – Fundamental Perspective 4 December 2017

Global equity markets came under pressure towards the end of last week on news that former US national security advisor Flynn struck a deal to cooperate with special counsel Mueller’s investigation into Russian interference in the US election.
However, US equities were buoyed by the potential for tax reform and the US Senate passed their version of the tax reform bill after markets closed on Friday. USD has opened higher this morning as a result whilst Asian equity markets are mixed.
The US Senate passed its version of the tax bill but the bill differs from the one passed by the House in early November and thus the two bills will need to be reconciled in party conference negotiations before a final bill can be signed into law by Trump.
Barclays Research maintains its view that tax cuts would likely lead to “… modest near-term USD strength…”.
This week is expected to be a big week for the UK and GBP as PM May heads to Brussels today to meet Barnier at 12.15. The UK’s payment to the EU, EU citizens’ rights and the Irish border are three of the key points where sufficient progress needs to be made before next week’s EU summit to ensure that trade talks can begin early next year.
GBPUSD support comes in at 1.3380 ahead of 1.3200 with resistance at 1.3550 and 1.3660. In EURGBP, supports is found at 0.8775 with resistance at 0.8840-0.8860.
In Germany, Chancellor Angela Merkel and the leader of the Social Democrats agreed to engage in coalition talks which are likely to continue into Q1-18.
The key data point this week is US nonfarm payrolls which Barclays Research expects will “…show strong performance (200k), following two months of disruptions by the hurricanes

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