Incisive market commentary from David Morrison

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Collapse 2017 <span class='blogcount'>(348)</span>2017 (348)
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EURUSD breaks above resistance - PM Bulletin
31 Jan 2017
Equities recover after Monday’s sell-off - AM Briefing
31 Jan 2017
Trending markets and Andrews’ Pitchfork -Trading Guide
30 Jan 2017
Investors rattled by Trump’s curbs - AM Briefing
30 Jan 2017
Dow holds above 20,000 as dollar firms - AM Briefing
27 Jan 2017
Dow breaks above 20,000 - Video Update
26 Jan 2017
Dow at 20,000 boosts risk appetite - AM Briefing
26 Jan 2017
Dow finally breaks 20,000 - PM Bulletin
25 Jan 2017
Wall Street leads stocks higher - AM Briefing
25 Jan 2017
Consolidation continues - Video Update
24 Jan 2017
Dollar recovery helps lift sentiment - AM Briefing
24 Jan 2017
Money management and stop-losses -Trading Guide
23 Jan 2017
Stocks fall on US protectionism fears - AM Briefing
23 Jan 2017
Trump inauguration in focus - AM Briefing
20 Jan 2017
A look-ahead to Trump’s inauguration - Video Update
19 Jan 2017
ECB President Draghi’s press conference in focus - AM Briefing
19 Jan 2017
Dollar steadies after sell-off - Video Update
18 Jan 2017
Equities drift in featureless trade - AM Briefing
18 Jan 2017
Dollar pull-back lifts precious metals- PM Bulletin
17 Jan 2017
Dollar slumps in early trade - AM Briefing
17 Jan 2017
Charting analysis for beginners - Trading Guide
16 Jan 2017
Sterling slumps on “Hard Brexit” concerns - AM Briefing
16 Jan 2017
Earnings in focus - AM Briefing
13 Jan 2017
Fourth quarter earnings in focus - Video Update
12 Jan 2017
Market Info Update: Martin Luther King Day Monday 16th January 2017
12 Jan 2017
Dollar lower as Trump skips stimulus talk - AM Briefing
12 Jan 2017
Trump news conference - Video Update
11 Jan 2017
Trump press conference in focus - AM Briefing
11 Jan 2017
Has gold turned a corner? - PM Bulletin
10 Jan 2017
Another mixed start for Europe - AM Briefing
10 Jan 2017
Trading Psychology - Trading Guides
09 Jan 2017
Sterling slips on "Hard Brexit" fears - AM Briefing
09 Jan 2017
Non-Farm Payrolls in focus - AM Briefing
06 Jan 2017
Non-Farm Payroll look-ahead - Video Update
05 Jan 2017
FOMC minutes viewed as hawkish - AM Briefing
05 Jan 2017
Look-ahead to release of FOMC minutes - Video Update
04 Jan 2017
FOMC minutes in focus - AM Briefing
04 Jan 2017
Strong start to 2017 - PM Bulletin
03 Jan 2017
Equities push higher in first session of 2017 - AM Briefing
03 Jan 2017
Expand 2016 <span class='blogcount'>(483)</span>2016 (483)


Early moves

European indices fall on US protectionism fears

Dollar slides but recovers from lows

The dollar fell sharply overnight while there were strong gains for safe havens such as gold and the Japanese yen. The move follows comments from President Trump over the weekend when he said he wanted renegotiate the North American Free Trade Agreement and dump the Trans-Pacific Partnership deal. Finally investors can see where Mr Trump’s priorities lie. No doubt he’s going to find it easier to make a noise on international trade relations and push what he sees as US interests than in persuading Congress to agree to fiscal measures which will add to the national debt.

The major US stock indices rallied on Friday following his inauguration speech in which he vowed to put America first. Maybe this played out well in appealing to US investors’ patriotic side, but it didn’t go down well elsewhere. The problem now is trying to work out how to play this policy shift, not least as it’s almost impossible to know how much of Trump’s comments are bluff and bluster or genuine objectives.

Stock Index Update

European equities end week with a rally

US investors cheer “America first” speech

There had been a softer tone to equity markets on Friday morning. However, all the major indices headed higher soon after the US open. The European majors closed out in positive territory although the FTSE100 ended the day a touch weaker. The UK index struggled for most of Friday’s session following the release of a surprisingly weak Retail Sales number for December. Retail Sales slumped by 1.9% on the month on expectations of a modest 0.1% decline. Sterling fell sharply on the news although it went on to make back all its losses as the day went on. This pick-up in the British pound kept a damper on UK multinationals which typically do well when sterling is falling.

Meanwhile, the US majors were all trading comfortably higher ahead of Donald Trump’s inauguration. They went on to end the session higher on what looked like a patriotic surge following President Trump’s bellicose promise to put America first.

Commodities Update

Crude Vienna producers’ meeting

Gold and silver trade around support

At the end of last week most financial markets were struggling to find direction ahead of Donald Trump’s inauguration. However, crude oil struck out on its own and was up over 2% ahead of the US open. The rally took WTI and Brent further away from chart support at $52 and $54 per barrel respectively. The move came ahead of a weekend meeting of OPEC members and those non-OPEC producers who committed to output cuts back in November. The meeting in Vienna was arranged to demonstrate that all parties involved in the agreement to cut production were fully complying.

Last week saw the release of some contradictory US inventory numbers. Data from the American Petroleum Institute (API) showed a crude drawdown of over 5 million barrels for the week ending 13th February. This was way above the 1 million barrel drawdown expected, although there were large builds in gasoline and distillates which helped to cap gains in the oil price. But the following day the US Energy Information Administration released its own inventory data. This contradicted the API numbers by showing a build in crude of 2.3 million barrels. The news saw both WTI and Brent pull back sharply, although support for WTI and Brent continued to hold.

Precious metals were mixed in early trade on Friday as investors kept their powder dry ahead of Trump’s inauguration. Silver had begun the European trading session sharply lower and appeared to be having trouble staying above support around $17. Meanwhile, gold traded in a narrower range and spent most of the session above $1,200. But really the price movement in both precious metals remained closely, and negatively correlated to the US dollar. Gold and silver dipped when the Dollar Index traded above 101.00 and rallied when it fell below this level. Nevertheless, the key support level for the index is 100.00 and it feels as if the dollar will have to pull back below this level (which suggests the EURUSD heading up to 1.0750 or so) for the two precious metals to head much higher from current levels.

Forex Update

Dollar slips on inflation fears

ECB not worried about inflation

The US dollar was skittish ahead of Donald Trump’s inauguration. The Dollar Index pivoted around 101 for most of the session while the EURUSD traded around 1.0660. This meant that the currency pair was on course to for its fifth consecutive week of gains, despite the euro falling to a 14-year intra- low of 1.0340 against the dollar less than three weeks ago. The dollar has soared since Trump surprised most people to clinch the US presidency back in November. The EURUSD traded just shy of 1.1300 as exit polls showed that Trump was doing better than expected soon after the polls closed. However, it subsequently slumped as investors priced in the possibility of fiscal stimulus and a sharp pick-up in inflation expectations.

Last week ECB President Mario Draghi said there was no evidence that Euro zone inflation was trending higher, despite a sharp uptick in December. He insisted that underlying inflation pressures remained subdued and that much of the recent pick-up was due to the increase in energy prices. Overall, his comments were considered more dovish than anticipated. In a speech made earlier in the week, Federal Reserve Chair Janet Yellen sounded relatively hawkish, saying that the US was close to maximum employment and inflation was near target. Despite this, investors were reluctant to increase their exposure to dollars while cutting them to euros.

On Friday data from China showed that the economy grew by 6.8% in the fourth quarter when compared to the same period last year. For 2016 overall, GDP came in at 6.7%, smack bang in the middle of the Chinese government’s target, but still the country’s lowest growth rate since 1990. Industrial Production grew 6% year-on-year and Fixed Asset Investment rose 8.1% - both numbers were slightly below expectations. Retail Sales were a touch better than anticipated, up 10.9% over the year.

Upcoming events

There are no significant economic data releases due out today.


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Posted by David Morrison

Category: AM Bulletin

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