Overview

After a few days of selling pressure, market sentiment recovered yesterday. However, that recovery was seemingly built on thin volumes, and with few significant fundamental drivers behind the move, there is caution into the European session today. Indices and commodities are tentative and mixed in performance, whilst USD is edging the gains across forex majors. Today we begin to see the main data announcements coming and a few loose ends tied up. A final look at US Q3 growth and Consumer Confidence are the highlights, even if the GDP number is very much in the rearview mirror now.

Today’s news

Main drivers: Market sentiment tentative after a recovery; Biden says he still has a chance to resurrect spending bill; UK government “can’t rule out” post-Christmas restrictions; no Fed speakers scheduled; Economic calendar: Eurozone US final GDP, Consumer Confidence and Existing Home Sales

The sentiment is tentative this morning: The risk rally has looked more cautious today. USD outperforming reflects this. Indices and commodities are mixed and lack the momentum for further upside.

Biden is still hopeful over his $2trillion spending plans:  After seemingly being kicked into the long grass by Senator Manchin, Biden is still hopeful he can persuade the Democrat to vote for his bill. [Risk positive] 

UK Covid restrictions, not before Christmas: “Boris has saved Christmas”, or at least that is what I’m sure he is hoping to spin. The UK Government will not increase social restrictions, but “can’t rule out” any post-Christmas changes. [mild GBP supportive] 

UK Q3 growth revised lower: The final reading of UK Q3 GDP has been revised lower to +1.1% QoQ (from +1.3% at the second reading). [little impact on GBP] 

Central bank speakers: there are no Fed speakers scheduled for today

Economic Data:

  • US final Q3 GDP at 1330GMT is expected to be unrevised at 2.1% (2.1% at the Prelim reading, +6.7% final in Q2)
  • US Consumer Confidence at 1500GMT is expected to improve slightly to 111.1 in December (from 109.5 in November)
  • US Existing Home Sales at 1500GMT are forecast to increase by +3.3% in November to 6.55m (from 6.34m in October)

Markets Outlook

Broad outlook: Markets are tentative this morning as the momentum from yesterday’s risk rally has waned. USD is slightly outperforming, with indices and commodities mixed. Once more, markets appear to lack the ability to trend. 

Forex: USD performing well across major pairs. There is no decisive trend though.

  • EUR/USD is again tentative around the middle of the range. Support at 1.1185/1.1220 up towards resistance at 1.1360/1.1380. There is a marginal USD positive bias which is dragging on the market lower, with initial resistance at 1.1304.
  • GBP/USD is tentatively continuing the rebound from the range lows around 1.3160/90. Moving through initial resistance around 1.3270/1.3280 would open the range highs again
  • AUD/USD is settling in a near-term range above support at 0.7080 but traction from yesterday’s rebound has been lost around 0.7155. Key resistance building around 0.7185.

Commodities: precious metals hovering, oil at a key inflection.

  • Gold has again flattered to decisive and the rally has tailed off with three negative daily candles in a row. A bull failure at $1800 and closing back under $1790 is a disappointment, but back under $1780 would re-open the key support around $1758.
  • Silver failed to hold the break above $22.60 but the potential for a near-term recovery pattern is still there. Daily technicals still point to a rebound and a test of the initial resistance at $22.67. A close above implies further recovery to test $23.00 resistance.
  • Brent Crude oil is at a key inflection point, where the rally is around levels where previous moves higher have faltered. The bulls need to hold on to the $72.80/$73.50 support area. Resistance at $75.30/$75.95 is key now.

Indices: have recovered strongly, but the move is threatening to tail off again.   

  • S&P 500 futures have recovered into the middle of what is increasingly turning out to be a medium-term trading range. Resistance at 4650/4670 needs to be overcome to turn more bullish in the range. Back below support at 4585/4610 turns negative.
  • DAX is into the mid-range pivot resistance area at 15,400/15,510. A breakout through 15,530 is needed to turn more positive. The outlook remains highly uncertain.
  • FTSE 100 pushed above 7300 but is threatening to give the move back again today. Moving below 7257 turns the outlook more negative again.