UK 100 Index called to open +10pts at 7355, holding onto Friday’s late bounce from 2-week intersecting falling support at 7330. This builds on Thursday’s 7260 rebound, keeping alive rising support since early November. A bullish overnight test of 7360 bodes well for revisiting Friday’s 7370 highs, maybe even 7397 record highs from the turn of the month. Bulls need to overcome 7360; Bears require a breach of 7340. Watch levels: Bullish 7365, Bearish 7335.

Calls for a positive open come courtesy of a higher close for Wall St on Friday and a largely optimistic start to the week in Asia, although oil prices falling to 3-month lows continues to weigh on sentiment as we head into a busy week for geopolitics and central bank updates.

UK Index sentiment may be impacted by M&A in the housebuilders space as we hear of Bovis Home in talks with Galliford try on a possible merger, having rejected an approach from Redrow. Note banking behemoth HSBC replacing Chairman Flint with boss of AIA Mark Tucker, who used to head up Prudential.

While a weak USD is helping metals prices like Copper rebound strongly, Australia’s ASX is hurting from weakness in Energy overpowering strength among Miners. Japan’s Nikkei is weathering a strong Yen and Energy weakness thanks to gains in Telecoms.

Wall Street closed higher on Friday following the strong jobs report, with the highest increase in construction employment since 2007 helping industrial names to outperform, however weaker Crude Oil prices snapped the weekly streak of gains for US indices. General Electric led the way for the Dow Jones, while Utilities and Telecoms joined the aforementioned Industrial sector at the head of the S&P 500. Note the Nasdaq, with fewer energy names on its books, outperformed, up 0.4%.

Crude Oil is beginning the new week along the same vein as last week, with both Brent and US Crude trading at their lowest levels since OPEC’s production cut agreement made on November 30, despite USD weakness, at $51 and $48 respectively. This comes as the Baker Hughes Rig Count notched its eighth consecutive weekly increase, further fuelling concerns of increased US production offsetting OPEC’s attempt to rebalance global supply.

Gold is once again trading above $1200, basking in the glow of a weak US Dollar alongside other precious and base metals, despite expectations of a US Fed rate hike on Wednesday, suggesting this is now fully priced in. Consequently, a keen eye should be kept on FX space for an indication as to the yellow metal’s prospects as it looks to conquer $1211 and $1215 resistance to continue its recovery.

In FX, the USD Index trades fresh March lows (below 101), continuing to ease from Thursday’s highs on the assumption that a Fed rate is fully priced in. Compounding this is further digestion of a more hawkish ECB president Draghi which has sent EUR/USD to levels last seen 8 Feb, keeping Germany’s exporters and the DAX under water. While this results in a weaker GBP/EUR (testing 1.14), note USD weakness helping GBP/USD bounce (back above 1.22) despite the UK closing on a triggering of Article 50.

In focus today, and indeed this week, will be the build-up to the UK Prime Minister’s potential triggering of Article 50 (tomorrow?), a tight Dutch election (another populist backlash? Nexit?) and what most expect to be another Fed rate hike on Wednesday evening. This means close watching of the trio of GBP, EUR and USD until Thursday.

Macro data is, however, rather lacking today, limited to Italian Industrial Production (9am) likely delivering a traditional January correction from year-end December strength, so expect monthly contraction and an annual rate of growth back towards the mean of the last 2 years.

Thereafter, with a US rate hike baked into asset prices, US Labour Market Conditions offers one of the last employment data prints before the Federal Reserve’s FOMC pulls the trigger on its second US interest rate increase in four months and second in fifteen. Watch USD.

Speakers today include the ECB’s Visco (Italy) just after the European open, followed by IMF Chief Economist Obstfeld and the ECB’s Linkannen (Finland) mid-morning. This afternoon comprises ECB Executive Board Member Lautenschlaeger and President Mario Draghi, the latter’s sure to steal the limelight after last week’s hint about tighter policy and some even asking whether a rate hike could come while the central bank tapers its QE programme. Another reason to watch EUR.

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