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ThinkMarkets UK Open: Settled

UK prelim GDP in focus

A rebound here would be a welcome reinforcement cushioning the BoE's recent decision to hold rates in January, in a highly divisive 7-2 MPC vote. Forecasts are pencilled in for 0.2% m/m growth, beating out prior month's uninspiring -0.3%, though the y/y number remains subdued. Notably, the data is backwards-looking so reactions could be mixed.

Cable stretches above 1.29, opposing a move towards 1.28 levels having camped at multi-month lows at the end of last week. A step higher into 1.3 gives the under pressure Sterling a much-needed breather.

Asia's broader risk rally should spill into Europe open and see the currency supported, but expect mixed price action off the back of prelim GDP.

While the trajectory of the UK economy clearly deserves focus following all the preamble that took place leading into the BoE's decision, I'd contend that Brexit uncertainties remain just as pivotal as traders appear eager to make waves on any transition soundbite.

Elsewhere, markets also catch BoE Gov. Carney speaking before the House of Lords at 3.35 pm GMT.

More losses for EUR

EURUSD looks to be on track to register its seventh straight session of losses, finding difficulty in removing itself from the edge of breaking significant 1.09 support levels - and with it, multi-year lows. Weakness has likely been driven by a confluence of factors in virus concerns, weak European investor confidence data and recently, the resignation of Merkel's chosen successor AKK.

Up ahead, Lagarde talks at 2 pm GMT in European Parliament. A report will also be made available, though is unlikely to make waves given its dated from 2018.

Can't stop, won't stop

There's not a lot stopping equities at the moment, with risk sentiment during Asia remaining disinterested in Coronavirus concerns and continuing to tip in favour of moves higher. Nasdaq futures, a bellwether for global risk appetite has clearly led the way; S&P futures following closely beind.

This has risk assets looking relatively healthy walking into Europe with FTSE poised for a considerable bounce at the open to the tune of 0.60%. DAX also looks likely to surge ahead and recapture all-time highs, attributed to its heightened economic sensitivity to the flickering expectations of the true economic fallout from China.

Aussie sentiment unsurprising

NAB Business confidence numbers saw marginal improvement for AUDUSD, but effectively, read flat. Relative to the US, sentiment continues to struggle. Though I don't find this surprising given the economic fallout from bushfires and the like. AUDUSD has outperformed, trading back into 0.67 amid better risk appetite. Long AUDNZD still seems good risk/reward taking signal from the bottoming of relative yield differentials.

Asia EM on the move

MYR sees Q4 GDP numbers tomorrow and could be in for a low print. The Ringgit has strengthened 0.31% against the USD at time of writing. Concerns from the rest of Asia also continue to ease with KRW, THB and TWD outperforming in the region.

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