Bored-er of Brexit ambiguity

Bored-er of Brexit ambiguity

Henry Croft, Research Analyst at Accendo Markets commented to clients this morning:

FTSE 100 Index called to open +20pts at 7405, having broken out from the key 7400 psychological level that had proved a hindrance since yesterday afternoon, keeping the week-long uptrend alive. Bulls will be hoping the breakout overcomes yesterday’s flash highs of 7420 to further recover from last week’s risk-off move. Bears, however, will be looking for a retracement and breakdown from rising lows support at 7395 to return to yesterday’s lows of 7355.  Bullish 7420Bearish 7395.

Calls for a third consecutive positive opening call come following a mostly positive lead from Asia as US-North Korean tensions continue to dissipate, further clarity from the UK government surrounding its Brexit negotiating position and an overnight Crude Oil rally from 3-week lows after the US private sector reported a bullish inventory draw-down overnight and the US dollar rally takes a breather ahead of tonight’s Fed FOMC minutes. This is helping to offset the impact of a lacklustre US session, despite mostly positive macroeconomic data as the Retail sector weighed.

Hong Kong’s Hang Seng is the rank outperformer in Asia, rallying ahead of Tencent results later today while Australia’s ASX is also positive as commodities (ex-Iron Ore) repa the benefits of a weaker US dollar. Japan’s Nikkei is marginally weaker, as industrials weakness offsets the positive impact of a weaker Yen for its exporters.

US equity markets closed around breakeven yesterday with Retail weighing on the wider market, despite Sales data coming in higher than expected, as earnings releases from key sector components disappointed. Home depot provided almost half of the Dow Jones’ losses as the index closed marginally above break even, while Tech weakness led the Nasdaq to underperform and the S&P 500 to close just shy of flat.

Crude Oil prices have recovered from yesterday’s 3-week lows as the American Petroleum Institute reported a 9.2m barrel draw-down, almost three times larger than expected. This bullish inventory print, complemented by a pause in the US dollar rally, has helped both Brent and US benchmarks to retain $51 and $47.40 handles respectively. Watch this afternoon’s EIA inventory data for a confirmation or dispelling of API’s report.

Despite edging higher yesterday evening as the US dollar rally pauses, Gold has been unable to capitalise, failing to trade above $1274 overnight as North Korean tensions ease. Traders of the precious metal will be keenly watching the US government and the global reserve currency today for any more cues.

In focus today will be UK Unemployment and accompanying Wage data (9:30am). After witnessing July Inflation come in beneath expectations, continuing to fall from its May peak, Bank of England policymakers will likely be further put off from raising interest rates should wage growth remain stagnant at 1.8% as expected. Watch GBP and the FTSE.

A close runner up for data print of the day, the final reading of Eurozone Q2 GDP (10am), will look to complete an impressive duo of European growth data. After engine room Germany yesterday reported an acceleration in its annual growth figure to its highest level in 4 years, the Eurozone equivalent is expected to be confirmed at a 6-year high of 2.1%.

This afternoon’s US data consists of Housing Starts and Building Permits (1:30pm), with the former expected to produce a fresh 5-month high while the latter retreats from June’s 6-month best reading, and, of course, the customary Wednesday release of EIA US Crude Oil Inventories (3:30pm) adding the regular excitement to Crude Oil markets.

Note, FOMC minutes from its July meeting will be released at 7pm. While US inflation has cooled and other hard data prints have disappointed, a good number of policymakers still expect another 2017 rate hike; influential New York Fed President Dudley was the latest to express this view  on Monday. Should the minutes highlight an overtly dovish view, USD traders could be in for an exciting evening.”

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