We’re just about holding onto the support levels with the FTSE bouncing off the 5200 level once again.  Investors seem reluctant to extend the rally further after the substantial gains we’ve seen since March and it looks like most have shut up shop for this week ahead of the Christmas break.

The CBI’s revisions to UK growth next year is the main cause of the modest gains this morning, so there’s a little appetite for risk with a scattering of banks, energy and mining stocks leading us higher.  Growth will be the highlight of this week as the final readings for UK and US Q3 GDP are released and for the remainder of the week economic data is desperately thin on the ground.

The final Q3 GDP reading tomorrow is due to be revised from -0.3% to -0.1%, bringing the year of year down from -5.1% to -4.9%, so a slight improvement but once again confirming that the UK is still in a recession whilst other economies returned to growth in the third quarter.  The UK has now experienced its longest run of negative growth on record with three quarters of contraction making this a worse recession that the past four in the last century.  The road to recovery is still a long and winding one and it’ll be even longer before we return to the sort of growth levels of the peak pre-crisis.

So the momentum for indices has come to an end for now as investors bank hefty gains and take some time to foresee what 2010 holds.  My crystal ball tells me that next year won’t see a repeat of the sort gains we’ve seen for equities in 2009 and I won’t be surprised if the FTSE 100 ends the year near to where it commences it.

While European indices attempt to make some ground this morning the dollar continues to find strength, a further indication that the dollar weakness/equity strength correlation is breaking down.  The change in sentiment towards the dollar has been apparent over the couple of weeks and now any strong US economic data is expected to be dollar supportive whereas for most of 2009 it’s been the other way round.

The euro, sterling and yen are all weaker this morning and it looks like the dollar has seen the worst of its demise this year.  The euro is certainly not a currency that investors will want to have exposure to over the extended holiday period with all the credit defaults that have emerged recently.

The extent of the dollar’s correction has shaken out quite a few bears.  In EUR/USD the 1.4300 level seems to be holding for now with Friday’s low at 1.4260 being the near term support and then 1.4080.  If we head below there then 1.3800 can’t be ruled out as a target.  Cable has also been under pressure so far this morning and 1.6050 was Friday’s low which will be in the sights of dollar bulls.

A little bit of tension between Iraq and Iran has lifted Brent crude back above $74 and this geopolitical news is helping to push gold a little higher too.  Good US housing data tomorrow might also lend further support to oil prices.  The recent cold snap across the Northern hemisphere is another factor behind the little bounce we’re seeing.