After a turbulent session on Wall Street in the previous session, Asian markets and European bourses rose on Friday. US futures are also pointing to a stronger start to trading on the opening bell and a rally into the year end after a particularly volatile couple of months. US – Sino trade tensions, US political woes, higher interest rates and concerns over the health of the global economy have weighed on sentiment in the final quarter of 2018 putting US stocks on track for the worst December performance since the Great Recession. Thin volume amplified the sharp moves as most traders remain on the side-lines across the holiday period.
Yet despite the move higher in global equities on Friday, the fact that the economic, political and geopolitical concerns are unresolved heading into 2019 means that flows into safe haven currencies, such as the Japanese yen and the Swiss franc have remained strong. The dollar was trading marginally lower versus a basket of currencies yet plummeted versus the yen and Swiss franc. Whilst big swings continue to play out in equity markets, keeping traders on edge, we can expect safer haven to stay in favour.
Oil inventories to keep oil bears in control?
Extreme volatility hasn’t just been confined to equities, oil is also been experiencing extreme bounces not suitable for the faint hearted. Whilst Brent moved 1.5% higher in early trade on Friday, after having been as much as 3% higher, it still remains close to its lowest levels in a year. Rising inventories and concerns over a slowing global economy have kept demand for the black stuff low.
Traders will turn their attention to EIA oil inventory data due for release at 11am ET. A draw of 2.9 million barrels is expected. If this materializes it will be the fourth straight decline, sufficient to unnerve traders, which amid low volumes could see the bears extend last weeks 10% sell off. Despite big swings, Brent is trading flat on the week this week.
US government shutdown continues
Due to the government shutdown, trade balance data that was originally planned for release today, will not be published.
German CPI in focusWhilst the US government reconvened on Thursday, there were few signs of progress. The end of the partial government shutdown is expected in the new year when the Democrats take control on the House. With a lack of data driving the US dollar, EUR/USD will be looking at German CPI data for direction. German inflation is expected to tick lower in December to 1.9%, down from 2.3%. Inflation is expected to decline as the ECB remove support in the form of asset purchases, this could dent demand for the euro.