Sterling bears made a late appearance on Thursday following the Bank of England’s unanimous decision to keeping UK rates unchanged as the improving domestic data quelled some Brexit concerns. Although it was widely expected that the central bank would maintain a passive stance in this period of central bank caution, the indication of further rate cuts in the future left Sterling vulnerable to losses. While data from the UK post Brexit has been unquestionably resilient, it may be too early to gauge the ramifications of Brexit to the UK with more time needed to fully understand the various impacts. As the doors have been left open for a further rate cut in the future, there may be an increasing focus towards UK domestic data for those seeking additional clarity ahead of November’s BoE meeting.
The lingering Brexit anxieties still have a firm grip on the Sterling with further losses expected as speculation grows over the BoE cutting UK rates in the future. From a technical standpoint the GBPUSD is under pressure on the daily timeframe and a breakdown below 1.3150 could open a path towards 1.3100 and potentially lower.
Dollar dogged by Fed uncertainty
The conflicting comments by Fed officials on US rate timings have created a thick cloud of uncertainty which continues to leave the Dollar vulnerable to losses. Optimism towards the central bank taking action is wavering with the recent soft domestic data from the States thoroughly discounting expectations of September being a “live” meeting to raise US rates. Although it is widely expected that the Fed will maintain a cautious stance in September, the discussions of the US economy overheating if rates are left low for too long has sparked speculation of possible surprise rise, consequently leaving investors on edge. It seems likely that the Federal Reserve will examine further domestic economic data before justifying raising US interest rates in December.
Much attention will be directed towards US retail sales which could provide an additional piece to the Fed rate hike jigsaw. If retail sales exceed expectations, then the Dollar could be offered a welcome boost as optimism is renewed towards the health of the US economy. From a technical standpoint, the Dollar has struggled to break above the 96.00 resistance as uncertainty repels investor attraction. Prices are trading above the daily 20 SMA while the MACD has crossed to the downside. A breakdown below 95.00 could trigger a further selloff towards 94.00.
WTI Oil dips below $44
WTI Oil plunged by 3% on Wednesday with prices cutting through $44 following the sharp 4.6 million barrel build in US distillates inventories which cemented concerns over the excessive oversupply in the global markets. Oil prices have become increasingly sensitive to supply data with negative news exposing the commodity to sharp downside shocks. Major oil producers are still engaged in a quest to bolster production, while anxiety over the returning crude supplies from Nigerian and Libya has haunted investor attraction further. The speculative boosts created from the heated rumours of a production deal are losing ground with bears attacking at any given opportunity. Attention may be directed to the pending informal OPEC meeting in September where the cartel will meet with Russia to discuss ways to mitigate the excessive oversupply. If the meeting concludes without an effective deal then Oil prices could be exposed to steeper losses as the oversupply fears intensify.
From a technical standpoint, WTI is heavily bearish on the daily timeframe as prices are trading below the daily 20 SMA while the MACD has crossed to the downside. A breakdown and daily close below $44 could encourage a further decline towards $41.