gold-dec212017

Gold continues recent recovery, euro rises versus peers, key European equities sell off sharply, U.S. equities fall after tax cut programme gets the green light

Dec 21 • Morning Roll Call • 626 Views • No Comments

Throughout 2017, the promise of Trump’s flagship tax cutting programme, has bolstered the value of equities, as investors have immediately translated the cut as substantial increased profits for major corporates, leading to increased shareholder rewards and dividends. With the programme now only a step away from becoming law, it would appear that the markets have fully priced in the tax cuts, investors may now be struggling for further reason to send equity markets higher. The DJIA and SPX closed down on Wednesday as trading volume was naturally reduced, given the proximity of the Xmas holiday period.

The U.S. dollar sold off initially versus the U.K. pound and euro, but made major gains versus yen. Gold increased, edging close to the 200 DMA sited at 1269, whilst Bitcoin (once again) endured another wild day of fluctuations; from circa 18,000 to 15,300, falling by up to 15% at one stage. Economic calendar news from the USA mainly concerned mortgage applications which (in an expected seasonal fall), were down -4.7% for last week, whilst existing home sales bucked the seasonal trend and beat forecasts, by coming in up 5.6% for November and at 5.81m for the year.

European indices sold off sharply throughout Wednesday’s trading sessions, economic calendar news was scarce, however, the U.K. Brexit negotiation team threatening to shoot itself and the banking system in the head, probably didn’t help equities hold up. The IMF also issued stark warnings to Europe (as a wider area) and suggested that the ill effects of Brexit were already becoming visible for the U.K.

The U.K. prime minister delivered a veiled threat, in a committee hearing at parliament, that the Eurozone and Europe’s banks would find out just how much it needed the City of London after Brexit, whilst the BoE issued a statement (through the governor Mark Carney) at a separate hearing, that Eurozone banks would still be able to conduct business in the U.K. after Brexit. How Theresa May believes that threatening the 10,000+ Deutsche Bank workers in the U.K. somehow works in her favour, is a mystery. And given that a high percentage of the workers will be highly paid U.K. taxpaying citizens, her clumsy blackmail appears to be even more bizarre.

During the evening sterling gave up its gains, Tory chaos (due to yet another government minister resigning under a cloud after sexual allegations), has once again caused concern regarding the overall competence and governance of the Tory government. Sterling fell, or finished flat versus the majority of its peers, with the exception of yen, which fell versus the majority of its peers. In late trade the New Zealand dollar made significant gains, as GDP came in ahead of forecast at 2.7% YoY. Earlier in the day credit card spending in N.Z. recorded a huge surge; up 9.1% YoY.

European economic calendar news was also scarce on Wednesday, the German producer price index marginally missed the forecast, whilst the U.K. CBI total reported sales for December missed forecast, although both monthly readings are only regarded as low impact. The euro made significant gains versus its main peers, with the exception of NZD.

U.S.DOLLAR.

USD/JPY traded in a wide bullish daily range on Wednesday as it breached R2 late in the session, rising by over 0.6%, before giving up some gains, to close the day out up circa 0.5% at 113.35. USD/CHF whipsawed violently mid afternoon U.K. time, taking out S1, after previously rising through R1, the currency pair eventually settled above the daily PP, up 0.2% on the day. USD/CAD traded in a tight bearish range throughout the day, falling close to S2, before ending the day just below S1, down circa 0.4% on the day, at 0.986.

EURO.

EUR/USD spiked up through R2 during the afternoon trading session, before surrendering some gains, to close out up circa 0.4%, at 1.187. Since falling to a monthly low of approx 1.172 on December 12th, the major currency pair has made considerable gains. EUR/GBP traded in a tight range with a bias to the upside breaching R1, closing out the day up circa 0.3% at 0.887, a considerable gain from the recent low of 0.870 printed on December 10th. EUR/CHF has remained in a bullish trend for the last two days’ trading sessions, closing out up circa 0.6% at 1.171. The euro’s gain versus the Swiss franc from mid June has been considerable; rising from approx. 1.08 to today’s level, close to the 2017 high set in late November.

STERLING.

GBP/USD gave up its gains after breaching R1 and rising by approx. 0.3%, to close out the day  flat at 1.337 and resting close to the daily PP. The major currency pair, often referred to as “cable”, has registered significant losses since posting a multi month high on December 3rd at approx. 1.36. Versus both Australasian currencies, sterling has lost considerable ground over recent weeks, after posting 2017 highs in late November/early December.

GOLD.

XAU/USD traded in a bullish range during Wednesday’s sessions, reaching 1267 at one stage,  just 2 points short of the critical 200 DMA level, before slipping back to 1265, up approx. 0.4% on the day. Since registering an approx four month low of 1236 on December 12th, the precious metal has staged a fight back, despite the risk on mood enveloping equity markets, which effects gold’s appeal as a safe haven security.

EQUITY INDICES SNAPSHOT FOR DECEMBER 20th.

•    DJIA closed down 0.11%.
•    SPX closed down 0.08%.
•    FTSE 100 closed down 0.25%.
•    DAX closed down 1.1%.
•    CAC closed down 0.56%.

KEY ECONOMIC CALENDAR EVENTS FOR DECEMBER 21st.

•    GBP Public Sector Net Borrowing (NOV).

•    CAD Consumer Price Index (YoY) (NOV).

•    CAD Retail Sales (MoM) (OCT).

•    USD Gross Domestic Product annualised (QoQ) (3Q T).

•    USD Initial Jobless Claims (DEC 16).

•    USD House Price Index (MoM) (OCT).

•    EUR Euro-Zone Consumer Confidence (DEC A).

•    USD Leading Index (NOV).

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