FTSE tumbles & sterling holds firm ahead of employment data

<p>UK employment data to drag sterling lower? Sterling is managing to regain some lost ground against the dollar this morning, after upbeat US retail sales […]</p>

UK employment data to drag sterling lower?

Sterling is managing to regain some lost ground against the dollar this morning, after upbeat US retail sales and manufacturing data in the previous session boosted the greenback and fueled expectation of a Fed rate hike in December. The market is currently pricing in a 90% chance that the Federal Reserve will give the all clear in its December meeting to raise interest rates. Meanwhile weaker than expected inflation in the UK increased speculation for further easing by the Bank of England despite the weaker pound, putting selling pressure on the pound.

Today has seen a reversal of the trend with sterling trading marginally higher versus the dollar at mid-1.24 and the focus has shifted towards the UK employment report. The report is expected to show an increase in October of 2.3k people claiming unemployment benefits, whilst average wage growth in the three months to September is expected to have increased 2.3% year on year. Anything short of these figures could again fuel expectation of further easing by the Bank of England and therefore put renewed downward pressure on sterling, with a decisive break through 1.2400 possibly dragging cable back to 1.2350.

Crude oil rallies as OPEC talks draw closer

There is a certain amount of dejavu surrounding the lead up to the OPEC meeting at the end of this month. Rhetoric regarding crude oil production cuts is once again surfacing, leaving traders to once again question whether the oil producing countries are serious this time?

Crude oil futures jumped over 5.5% in the previous session, pulling off multi month lows on renewed expectation that OPEC will actually manage to agree to a cut. The oil markets have been rather pessimistic until now regarding any deal, as hopes have been built up prior only to be dashed on a regular basis.

However, warnings from the IEA regarding the worsening picture of the global supply glut might be the straw that breaks Iran’s back and compels them, along with others resisting the cuts to hammer together a deal.

Trades will be watching closely as US inventory figures are released this afternoon and tomorrow morning. Stock piles have been increasing at a troublesome rate recently so figures above expectation could actually increase the price of oil as it ups the pressure on OPEC to knock together an agreement.

Join our live webinars for the latest analysis and trading ideas. Register now

GAIN Capital UK Limited (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.