Stock markets ventured higher last week due to the combination of easing Brexit anxieties, optimism over central banks intervening to quell the market turmoil, and stabilising China data which bolstered investor risk appetite. Asian equities, excluding the Nikkei, concluded mixed on Monday despite S&P lifting China’s 2016 growth forecast to 6.6% from 6.35%. In Europe, stocks were uplifted by a rally in ARM shares and could be set for further short term gains, if the renewed risk appetite encourages investors to seek riskier assets. Wall Street could lurch higher on Monday by borrowing the momentum from Friday’s positive US retail sales report which diminished concerns over slowing domestic economic growth.

The persistent gains in global stocks are quite impressive and it remains a surprise how major markets have rapidly recovered from the Brexit shock. It is becoming increasing clear that optimism over central bank intervention remains one of the main driving forces behind the market rallies, thus raising questions on sustainability. Although the easing Brexit fears and stabilising China data has somewhat elevated global sentiment, the recurrent concerns over slowing global growth, central bank caution and depressed oil prices still linger in the background. The over-extended market rally may be running out of steam, with bears camouflaged in the distance patiently waiting for the critical moment to pounce.

Pound under pressure

Sterling bulls were offered a lifeline last week following the Bank of England’s unexpected decision to keep UK interest rates unchanged despite the ongoing post-Brexit uncertainty. This lifeline came to an abrupt end on Friday with the GBPUSD tumbling back towards 1.3100 following the positive US data which provided a foundation for sellers to attack. With the persistent Brexit anxieties having a noticeable impact on the UK economy, the Sterling could be left vulnerable to further losses. Although the BoE has kept the powder dry in July, expectations are still high over the central bank taking action before the end of the year. Monday’s economic data calendar is relatively light and this should offer an opportunity for price action to drive the GBPUSD lower. From a technical standpoint, a breakdown below 1.3100 could open a path towards 1.3000.

Dollar Index trades higher

The Dollar Index appreciated with ferocity on Friday following the impressive US retail sales report which boosted expectations over the Federal Reserve raising US rates in 2016. For an extended period, US data has followed a positive trajectory and the firm US retail sales add to the prerequisites that fulfills the domestic requirement for a potential US rate hike in the future. If US data repeatedly exceeds expectations moving forward, then the Federal Reserve could be provided with a compelling reason to break the trend of central bank caution. Although sentiment is turning bullish towards the Dollar, the main barrier that could still obstruct all efforts by the Fed to take action could be the ongoing Brexit anxieties. As of now, the Dollar Index has found support above 96.00 and the breakout above 96.60 which could open a path towards 97.00.

WTI Crude flirts above $44

WTI Crude was left depressed last week with prices cutting below $46 as the ongoing oversupply woes provided a foundation for bears to install a round of selling. WTI was already pressured by the smaller than expected crude oil inventory draw in early July and now with Saudi Arabia incessantly boosting oil production, oil could be depressed moving forward. The horrible mixture of persistent oversupply concerns and fears over faltering global demand could create a platform for oil prices to trade towards $40. From a technical standpoint, a breakdown below $44 could open a path towards $40.