The US tax story is among the top headlines this week; Brexit negotiations moved to the second stagePosted on Wednesday, December 20 2017 at 5:13 pm GMT+0000
Brexit negotiations moved to the second stage
Sufficient progress has been made in Brexit negotiations and talks will be moved to the next stage of the future relationship which would include discussions on trade ties.
The next stage won’t be easy and sterling will be relatively affected by the negotiations. If good external relations continue, GBP will resume its rally and target the 1.3600 area, but if banks and major institutions decide to move their main branches to other European capitals, this will have a negative impact on the currency.
Technically a drop below 1.3300 will increase the pressure for a move towards 1.3200 in the coming days.
The dollar remains stable as the markets await representatives to cast a final vote in favor of tax reforms
The dollar lost some ground after the Fed meeting last week.
The US currency suffered losses as the Fed maintained its projections for three more interest rate increases in 2018 and 2019; market participants were anticipating a more hawkish stance.
Currently markets are expecting the tax reform to be passed this week. This law will help companies and give new impetus to stock markets. In the long term, tax cuts will lead to higher prices and will push companies to pay higher wages to attract labor, which in turn will push up inflation and interest rates.
After dropping to 1235$ gold turned back higher and is further advancing at each session.
If the tax reform is ratified, gold will become under pressure in the short-term but the overall trend is still bullish and first target is outlined at 1270 and in the next year may see new highs.
JPY remain stable despite the stock market rise
JPY remains firm backed by good economic data and improved trade data due to higher exports despite the rise in Japanese and US stock markets.
The Bank of Japan will tomorrow be completing its two-day meeting on monetary policy, which will be the last meeting for the year. The BoJ is expected to keep interest rates unchanged, so I expect the USDJPY to consolidate between 111.50 and 113.20 until the end of the year.
Oil rise seems to be temporary
Efforts by OPEC and oil-producing countries pushed oil prices higher. And currently the decline of drilling activities and US platforms contribute to prices stability.
But in the long term, I do not expect a break above 60$. Technically, there is a strong resistance around 59$ and a drop below 55.80 will confirm a Bearish reversal pattern which will open the way towards 52.00.