U.S. equity markets fail to hold record highs, currency price action is scarce, gold trades sideways

Jan 19 • Morning Roll Call • 1542 Views • Comments Off on U.S. equity markets fail to hold record highs, currency price action is scarce, gold trades sideways

Having reached fresh record highs on Wednesday, the key USA equity indices gave back some gains, with the DJIA still holding its position above the (newly breached) handle of 26,000, but closing down 0.37% on the day. Disappointing new housing starts data helped to cool market sentiment in the USA; falling by -8.2% in December, versus a forecast of -1.7%. There was a time when the (now annual) threat of a government shutdown, on this Friday January 19th, when temporary government funds will technically run out, would have investors running for the hills and sending U.S. markets into a tailspin, but now it hardly merits a mention in the mainstream financial media.

Most pundits and investors are expecting both political parties in the USA to reach a compromise to simply avoid the govt. shutdown, by increasing government debt. And with Trump playing his guilt trump card, suggesting that; “it’ll be the brave boys and girls in the armed forces, serving their countries in foreign lands, who won’t get paid”, we can expect a resolution to be reached, sooner rather than later. In other USA economic news on Thursday, weekly jobless claims beat forecast by coming in at 220k for last week, whilst continuous claims missed the forecast.

During a day in which the majority of major currency pairs and the most traded cross currency pairs, traded sideways and in tight ranges, day traders will have struggled to take profit out of the FX market. The USD fell moderately versus: the euro, sterling and Swiss franc, but was close to flat versus yen and the Canadian dollar. Gold also traded in a mainly sideways range, ending the day at circa 1,326, after reaching a high of 1,333.

GBP/USD reached a level not witnessed since shortly after U.K. voters elected to exit from Europe in June 2016, it’s now enjoyed a fifth straight week of gains, the best since 2014. However, at an intraday high of 1.391, cable is still short of the 1.500 of early June 2016 and the current rise in sterling owes more to dollar weakness, as opposed to pound strength. As an example; EUR/GBP is close to 89.00, versus the 74.00 pre referendum decision level and the European Union is the U.K.’s largest trading partner. Moreover, rising GBP/USD and the rising price of oil and gas, will inevitably lead to inflationary pressures increasing in the U.K. economy. Therefore any rejoicing by the U.K. media, in relation to a rising pound, needs to be kept in moderation.

There was no significant U.K., Eurozone or Brexit economic news published on Thursday, other than France’s president Macron visiting Britain, where he quickly set about delivering a stunning and scathing evaluation of the U.K. leaving Europe, which could be quickly reduced to; “get lost, you’re out, you’re not getting anything, and we want the City of London business”. The euro made modest gains versus JPY and USD, but fell modestly versus its other peers. European equity markets fell, with the DAX experiencing the largest falls, down by 0.74% on the day.

U.S. DOLLAR

USD/JPY closed out the day sited near the daily PP, after trading in an extremely tight range, up circa 0.1% on the day at 111.0. USD/CHF closed down circa 0.3% on the day at 0.958, resting close to the first level of resistance. USD/CAD traded in an extremely tight range of circa 0.2% on the day, closing out down circa 0.1% at 1.240, just below the daily PP.

STERLING

GBP/USD traded in a tight bullish range through the sessions, and ended the day up circa 0.2% at 1.389. GPB traded in a tight range, but rose versus all of its peers during Thursday’s sessions, making the most gains versus AUD, CAD, JPY and NZD, up similar amounts to GBP/USD on the day, circa 0.2%.

EURO

EUR/GBP traded in a tight range with a bearish bias during Thursday’s sessions, closing out the day down 0.2% on the day at 0.881. EUR/USD closed up circa 0.1% on the day at 1.224, sited near the daily PP, after trading in an extremely tight range. EUR/CHF fell through S1 to end the day down circa 0.4% at approx. 1.173.

GOLD

XAU/USD fell by circa 0.2% on the day at 1,326 after trading in an extremely tight range. Gold has registered two days of losses, the first time the precious metal has done so since the mid December 2017 lows of 1,236 were recorded.

EQUITY INDICES SNAPSHOT FOR JANUARY 18th.

• DJIA closed down 0.37%.
• SPX closed down 0.16%.
• FTSE closed down 0.32%.
• DAX closed down 0.74%.
• CAC closed down 0.02%.

KEY ECONOMIC CALENDAR EVENTS FOR JANUARY 19th.

• EUR. Euro-Zone Current Account n.s.a. (euros) (NOV).
• GBP. Retail Sales Ex Auto Fuel (YoY) (DEC).
• USD. U. of Mich. Sentiment (JAN P).
• USD. Baker Hughes U.S. Rig Count (JAN 19).

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