Fundamental Analysis

Markets Shrug Off North Korea's Missile Test | Brexit Negotiations Seen A Major Breakthrough | Jerome Powell Supports Fed Stance

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The UK government has agreed to pay their Brexit bill
Northern Ireland issue is still the thorny matter
the US senate Budget committee decided to push the bill towards full chamber

Global equities are on track to end the year at their record highs and this would be one of the best year since the immediate aftermath of the financial crisis.

A major unexpected breakthrough happened yesterday when it comes to the subject of Brexit. The UK government has agreed to pay their Brexit bill and the amount will be in between 45-55 billion euros. This is surely a substantial amount no matter how you look at it and hopefully the government understands that it is not committing to something which it cannot afford to pay.

However, it should aid the deadlock in the Brexit negotiation and help them to move forward. Picking up the Brexit bill has been the very thorny issue since day one and given that now the government has agreed to a respectable amount, the talks between the UK and the EU (which are set to resume next month) should be smoother. If the EU accepts the bill, then we will be moving to the next hurdle which is securing the EU rights. Nonetheless, the more favourable outcome so far has made some positive impact on Sterling which recovered some of its lost ground.

It is important to keep in mind that we are no way close to be out of the woods when it comes to the smooth negotiation process because the Northern Ireland issue is still the thorny matter.

North Korea's regime confirmed yesterday that they have completed their nuclear program. Initially, the news about another missile test created some uncertainty in the market, but it was short lived due to the fact that the reaction from the US was muted. Usually, Donald Trump would take the matter to Twitter and he would come up with some ballistic and firy comments.

However, we have not witnessed that yesterday. This enabled investors to keep the focus on the earning's story and that continued to help Wall Street to push the indices higher. President Trump vowed yesterday to take care of the situation. The question which investors should be asking, and not underestimating is, if Trump's reaction and action would result in more sanctions on something far larger?

As for the dollar index, the US senate Budget committee decided to push the bill towards full chamber. This simply means that there will be a marathon of debate which could delay the process further if the bill continued to be tossed around. The upcoming Fed chairman confirmed in his testimony to senate that December rate hike case is coming together. He supports the current stance which the Federal Reserve Bank has. Despite his outlook, the dollar index hasn't been able to rock. Even the unexpected improvement in the US confidence date (released yesterday) failed to produce much colourful result.

For Euro traders, they are seeking only outcome when they look at the biggest economy of the Eurozone, which is stability. This is where the grand coalition provides the answers to all the questions which one may have.

Author: ThinkMarketsWebsite: https://www.thinkmarkets.com/
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