Official BLOG

Daily Roundup – Markets review

December 6th


The Aussie dollar remains under pressure with disappointing trade surplus data overnight compounding the effect of yesterday’s shortfall in GDP. On top of this, fears of escalation in the US-China trade dispute following news of that arrest of the Huawei CFO is heaping further pressure on the Aussie dollar. This remains one to watch, although given the bearish tone that has dominated on crosses like AUD/USD for most of the year, at some point bargain hunters may start to move back in – especially given those fresh clues we saw in last night’s Beige Book over US monetary policy having the potential to become a little more dovish in the New Year.

The DXY dollar index is currently running close to recent highs, with last night’s potential escalation in the China-US trade war driving a flight to safety. This does however raise the prospect of an shortfall in US economic data as having the potential to push the dollar lower, at least in the short term. Today’s ADP payroll reading may hold some potential here – job creation is expected, although anything much below 200,000 could deliver that sell signal. Similarly, composite PMI from the US is set to be fall a little to around 59.0 but anything much below this could again hit the greenback. A final Fed rate hike for the year is likely but not certain – anything that throws this into question would leave the dollar exposed.

Brexit woes will continue to weigh on the Pound, although the chances of a no-deal Brexit – which is where the real downside risk is being priced in – remains slim. Goldman Sachs have this as low as 10%, but exactly what happens in the next week remains impossible to predict. Theresa May could face a leadership challenge or a decision to revoke Article 50 could also be taken. However with the Pound so beaten down, the greater potential may well lie on the upside here – so long as investors are prepared for a bout of volatility in the interim.


Fundamentals could easily see a big breakout for Sterling, but from a technical perspective, there’s a descending triangle in play. Look for a move lower to around 1.2685, representing the lows for the year.