Risk Consolidation Sought
The buoyant reaction to the (temporary) resolution of the US’ fiscal issues clearly shows that many in markets clearly feared a more adverse outcome. European and US bourses rallied across the board on Wednesday, and there is plenty of scope for further consolidation heading into Friday’s payrolls report, which is expected to show ongoing resilience in the US labour markets. Investors would be fully aware that fundamentals remain suspect – the avoidance of the fiscal cliff is simply to prevent recession, let alone provide any form of growth stimulus. So far our economists are not anticipating any adverse impact to growth on the back of the agreements reached this week in Congress, though more challenges are due towards the end of Q1. As if political and economic factors in the Eurozone were not enough, difficult negotiations over the US debt ceiling will need to be added to the list. Ahead today, European activity figures are due, and markets will seek clues on the execution of the Fed’s numerical targets as the December FOMC minutes are out. Overnight EURUSD traded 1.3124-1.3190 and USDJPY 87.09-87.36.
Click here to read the full report: UBS Morning Adviser Europe
UBS Investment Bank