ECB’s Draghi enters the scene

A growing sense of anticipation firmly gripped the financial markets on Thursday as investors prepared for the European Central Bank meeting which most hope could provide clues about a possible extension to the QE program. While it is widely expected that interest rates and the current 80 billion bond buying remains unchanged in October, the press conference where Draghi may be bombarded by taper questions could spark explosive levels of volatility. With European inflation still well below the golden 2% target and unemployment hovering around 10%, the taper scenario looks quite premature. It seems likely that the ECB adopts an inactive stance this month before potentially taking action in December when the new inflation estimates will be released.

There still remains a growing weariness over the effectivenesse ECB adopts an inactiv of monetary policy to jumpstart economic growth and this is where Draghi enters the scene. Mario Draghi may attempt to keep the gates opened to more stimulus by reiterating his dovish mantra on how the central bank will do whatever it takes to revive economic growth. The “whatever it takes” signature statement has been heard many times and it is now a question if the markets are willing to listen.

Soft retail sales pressure Sterling

Sterling edged lower on Thursday following the flat retail sales figure of 0% for September which sparked concerns over cooling consumer confidence. Although the warm weather was attributed as part of the factors that subdued retail sales, this did little to repel sellers from enforcing further downside pressures on the pound. It is becoming quite clear that the hard Brexit jitters have clamped down on the Sterling with economic data almost becoming secondary as uncertainty erodes investor attraction towards the currency. The GBPUSD remains fundamentally bearish on the daily timeframe with the current relief rally providing an opportunity for bears to drag prices back down towards 1.2150.

WTI lingers below $51

WTI Crude lurched higher on Wednesday with prices smashing above the $51.50 resistance after the government reported an unexpected drop in domestic inventories which eased some oversupply concerns. The sharp up move was complimented with slight Dollar weakness which provided an additional foundation for bulls to install rounds of buying. Short term sentiment is slowly turning bullish towards oil with optimism rising over OPEC securing an output cut at its November meeting. If the pattern of declining inventories and rising expectations of an output cut persists, then Oil could enjoy a bull run ahead of the November 30th meeting.

The lingering question on the back of everyone’s mind is if OPEC will really move forward with a production cut as most investors have been left empty handed on numerous occasions.

Commodity spotlight – Gold

Gold received a welcome boost this week with the metal charging towards $1270 as the combination of Dollar weakness and slightly diminishing expectations over the Fed raising US rates in December attracted bullish investors. Prices were also buoyed by the growing uncertainty ahead of the US presidential election and Brexit jitters which triggered a wave of risk aversion consequently bolstering the yellow metal's safe haven allure. Dollar weakness has already provided an opportunity for Gold to trade towards $1270 with further inclines expected if bulls achieve a daily close above the daily 200 SMA. From a technical standpoint, although Gold is bearish on the daily timeframe, the current relief rally could send prices towards the $1285 resistance before sellers jump back in.