Daily Market Report - PhillipCapital UK - Financial News and Analysis
16 May

Daily Market Report - PhillipCapital UK - Financial News and Analysis

Italy’s main stock market index slipped yesterday after Deputy Prime Minister Matteo Salvini insisted the country will "spend everything that we have to spend" in order to tackle unemployment amid worries that it could break EU rules on deficits and government debt. With Italy’s fractious populist coalition squabbling more than ever, President Sergio Mattarella has expressed his increasing concerns about Italy’s next year budget. Important data from the Eurozone on consumer price index, the ECB and trade are due today.


Global indices futures generally edged lower this morning, after the rebound due to reports that US President Trump is poised to delay a decision to impose auto tariffs by up to six months while banning his administration from using Chinese tech company Huawei. This decision is likely to avoid further tension during negotiations with the EU and Japan, in turn further antagonising allies as the Sino-US trade war escalates. The initial deadline with the proposed 25% tariffs was the 18th May but weak Chinese and US economic numbers released yesterday raised worries the trade war could weigh on the global economy that was already slowing posing Trump to rethink his stance. It has been reported that China has cut US treasuries to the lowest levels since 2017 in March, with China’s holdings falling to USD 10.4 billion, the first drop since November last year. Hence, as the tensions heat up, more options could be used by both nations to hit back at each other without hurting their own interests. Chinese President Xi denounced foreign efforts to reshape other nations as "foolish" on a speech yesterday stating that exchanges and mutual learning among civilisations should be reciprocal and equal implying that should the US eventually impose a new 25% tariff on another US$325 billion of Chinese imports that are not currently covered, China will retaliate.


The AUD fell approximately 20 pips in 15 minutes after published data showed unemployment increased further in Australia. Thus, with no further improvement in the labour market observed, coupled with unemployment rate picking up, it could path the way for the Reserve Bank of Australia to reduce interest rates over the next few months indicating more weakness lies ahead for the AUD. Governor Phil Lowe’s holds his speech on 21 May so investors will be looking for hints for RBA's future direction in light of the softer labour print.


The decline for the GBP continues, as some members of the UK parliament hope to reject UK Prime Minister Theresa May's Brexit deal when she brings it back to parliament next month. The main opposition party, Labour has also indicated that they will vote against May’s withdrawal bill next month if the deal does not meet Labour’s conditions. This has increased the possibility of a potential "hard Brexit". Meanwhile, the deadlock between the Conservative and Labour parties appears to be going nowhere, with yet no positive outcome from the cross-party talks. The current plan is to put a series of Brexit options to Parliament and the government has said it will aim to get the Brexit legislation passed before lawmakers go on their summer break. A potential resignation of PM May could bring about more political uncertainty which will lead to strong headwinds for the GBP.


Chart of the day

AUDUSD – Bearish 

· On a technical perspective, the trend is bearish, with prices below the 20, 40, 100 and 200EMA.


· Prices failed to break above the 40 EMA and retraced. This indicates that selling pressure is present.


· Downtrend line still intact.


· Based on the pivot point analysis, prices are below the pivot level. This signifies bearishness.


Resistance: R1: 0.69444, R2: 0.69615, R3: 0.69935


Support:      S1: 0.69124, S2: 0.68975, S3: 0.68655
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