Market commentary from David Jones, Chief Market Strategist at Capital.com
The week ahead is a little quieter in markets than the past few days but there is still plenty for traders to focus on.
Last week there was the widely expected rate increase from the Bank of England – only the second base rate rise since the financial crisis. Whilst this did give a very short term boost to the value of the pound, the currency closed on Friday not far off its lowest level versus the US dollar for 11 months. The end of this week sees the release of the latest UK GDP data – but with sentiment so poor towards the British currency at the moment it has left some wondering just what needs to happen to start some sort of recovery, because at the moment nothing seems to be working.
The end of last week saw the latest US unemployment data. Whilst this came in slightly lower than analysts’ expectations it still paints the picture of a robust US economy. Although the major falls in the technology sector – Facebook’s 20% plunge for example – has been great for headline writers over the past few weeks, it has not done anything to change the positive outlook for the wider stock market. We start this week with the broader US index, the S&P500, within a few percent of January’s all-time highs – don’t be surprised if these are broken in the weeks ahead.
After 2017 ended up being it’s worst year for more than a decade, recent months continue to see a resurgence for the US dollar. This strength, plus the bounce back for stock markets since March has meant that gold remains out of favour with investors. The double whammy of both rising stocks and a US dollar saw the yellow metal hit its lowest price since March 2017, trading towards the $1200 per ounce mark. In the past this has proved to be something of a key turning point for gold – so although it is still weak, it could be one closely watched by investors over coming weeks.