Monday 21 January 2019


It was a week defined by Brexit drama, US-China trade developments and ongoing political uncertainty in Washington.

Renewed optimism over US-China trade talks stimulated global risk sentiment on Friday with Asian stocks ending mostly higher. Although European markets are benefiting from the improved market mood, investors must remain alert and guarded. Geopolitical risks in the form of Brexit uncertainties, a partial government shutdown in the United States and the unpredictable nature of trade negotiations have left market sentiment fragile. With concerns over slowing global growth adding to the cocktail of fundamental themes impacting risk appetite, stock markets remain vulnerable to downside shocks.

Sterling was the main talking point across currency markets after aggressively appreciating yesterday evening. The sharp gains were attributed to growing expectations over the UK avoiding a nightmare no-deal outcome with the European Union. Appetite towards the currency was boosted further by speculation of a second referendum. Investors who were expecting the Pound to extend gains today were left empty-handed after the currency weakened across the board. With uncertainty clearly a major theme obstructing the Pound’s upside potential, the medium- to longer-term outlook remains in favour of bears. In regards to the technical picture, the GBPUSD is seen trading back down towards 1.2820 if sellers are able to secure a weekly close below 1.2920.

It was a relatively muted week for Gold, with bears eventually making an appearance on Friday afternoon. At $1,285 at the time of writing, bullion is enroute to concluding the trading week negative – breaking four consecutive weeks of gain.

The sentiment pendulum for Gold swung back and forth this week due to reports surrounding Brexit and US-China trade tensions. Within 24 hours, UK Prime Minister Theresa May went from having her Brexit plan dealt with a resounding loss, to winning a no-confidence vote. China started the week on a downer by announcing its worst trade decline since October 2016. Heading into Friday, optimism resurfaced on news that US Treasury Secretary Steven Mnuchin may dial back some tariffs on China. Safe haven assets, including bullion, may see resistance if global risks become less pronounced by way of substantial positive developments on Brexit and US-China trade talks.

WTI futures dipped at the start of the week, before climbing back above $52/bbl at time of writing. Oil is on course for three consecutive weeks of gains. Saudi Arabia got a head start on its supply cuts in December, ahead of the OPEC+ deal that went into effect this month. With Russia also pledging to reduce production at a faster pace, efforts to support oil prices appear to be gathering traction, despite the record crude output out of the US. Set against a slower economic growth backdrop for 2019, oil’s return to a bull market will be tested should global demand falter.

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