The sterling declined today as concerns grew that the Bank of England will slash interest rates this year. This happened as the market received important data from the country. The data showed that the economy expanded by an annualized rate of 0.6%. This was lower than the previous increase of 1%. On a MoM basis, the economy contracted by -0.3% after rising by 0.1% in the previous month. In November, the industrial production contracted by 1.4%, which is a sign of a troubled economy. Industrial production has been negative for the past six months.
The manufacturing production declined by 1.7% after rising by 0.5% in the previous month. On a positive side, the output in the construction sector rose by 2.0% while the trade deficit narrowed to £5.26 billion. Part of the reason for the weak performance in November is that companies held back investments as they waited for the outcome of the December 12 election.
US futures continued to soar as traders waited for corporate earnings. Futures tied to the Dow Jones Industrial Average and Nasdaq increased by more than 126 and 50 points respectively. This week, the market will receive important earnings data from companies like Goldman Sachs, Morgan Stanley, Blackrock, and Wells Fargo among others. According to Factset, traders are expecting companies in the S&P500 to report a 2% decline in earnings. If this happens, it will be the fourth straight quarter of declining earnings. This will be the longest streak since 2015. Traders expect growth to come this year as trade tensions cool. For example, data from Factset shows that traders are expecting earnings to grow by 4.6% in the first quarter and 6.4% in the second quarter.
GBP/USD
The GBP/USD pair continued the downward trend that started on January 2, when the pair traded at 1.3284. The pair reached an intraday low of 1.2960 after the negative growth data from the UK. As the pair dropped, it crossed the important support levels of 1.3050 and 1.3035. The RSI, which has been declining, dropped to below 30. The pair may continue to decline as traders start to price-in the first rate cut since 2018.
EUR/USD
The EUR/USD pair declined from a high of 1.1135 to an intraday low of 1.1112. The price is along the 14-day moving averages. It is also between the 14-day moving averages envelopes indicator. The moving average oscillator, which has been declining continued to decline. It crossed the neutral level of zero. The pair has been on a downward trend as the blue trendline shows. The pair may resume moving lower.
XBR/USD
The XBR/USD pair declined to a low of 64.40 from the day’s high of 65.30. The price is below the 14-day and 28-day exponential moving averages. The RSI has flattened, slightly above the oversold level of 30. Meanwhile, the money flow index has moved from the oversold level of 7 to the current high of 25. The price may continue moving lower in the American session.
General Risk Warning for FX & CFD Trading. FX & CFDs are leveraged products. Trading in FX & CFDs related to foreign exchange, commodities, financial indices and other underlying variables, carry a high level of risk and can result in the loss of all of your investment. As such, FX & CFDs may not be appropriate for all investors. You should not invest money that you cannot afford to lose. Before deciding to trade, you should become aware of all the risks associated with FX & CFD trading, and seek advice from an independent and suitably licensed financial advisor. Under no circumstances shall we have any liability to any person or entity for (a) any loss or damage in whole or part caused by, resulting from, or relating to any transactions related to FX or CFDs or (b) any direct, indirect, special, consequential or incidental damages whatsoever.
Recommended Content
Editors’ Picks
AUD/USD jumps above 0.6500 after hot Australian CPI data
AUD/USD extended gains and recaptured 0.6500 in Asian trading, following the release of hotter-than-expected Australian inflation data. The Australian CPI rose 1% in QoQ in Q1 against 0.8% forecast, providing extra legs to the Australian Dollar upside.
USD/JPY hangs near 34-year high at 154.88 as intervention risks loom
USD/JPY is sitting at a multi-decade high of 154.88 reached on Tuesday. Traders refrain from placing fresh bets on the pair as Japan's FX intervention risks loom. Broad US Dollar weakness also caps the upside in the major. US Durable Goods data are next on tap.
Gold price cautious despite weaker US Dollar and falling US yields
Gold retreats modestly after failing to sustain gains despite fall in US Treasury yields, weaker US Dollar. XAU/USD struggles to capitalize following release of weaker-than-expected S&P Global PMIs, fueling speculation about potential Fed rate cuts.
Crypto community reacts as BRICS considers launching stablecoin for international trade settlement
BRICS is intensifying efforts to reduce its reliance on the US dollar after plans for its stablecoin effort surfaced online on Tuesday. Most people expect the stablecoin to be backed by gold, considering BRICS nations have been accumulating large holdings of the commodity.
US versus the Eurozone: Inflation divergence causes monetary desynchronization
Historically there is a very close correlation between changes in US Treasury yields and German Bund yields. This is relevant at the current juncture, considering that the recent hawkish twist in the tone of the Fed might continue to push US long-term interest rates higher and put upward pressure on bond yields in the Eurozone.