Sterling displayed an incredible rebound during trading on Thursday with the GBPUSD surging towards 1.3265 following August’s blockbuster manufacturing PMI of 53.3 which instantly dispelled the ongoing Brexit fueled concerns. UK Manufacturing has hit a 10-month high clawing out of contractionary territories aided by a vulnerable Sterling that helped bolster export orders and input costs. While the rebound in manufacturing is unquestionably encouraging, investors should still keep in mind that it may be too early to gauge the ramifications of Brexit to the UK with more time needed for a clear picture. Although Sterling may enjoy further gains in the short term as expectations erode over the BoE easing further, the lingering Brexit uncertainty should cap upside gains in the longer term.
From a technical standpoint, Sterling bulls were offered a lifeline and the GBPUSD has already lurched over 130 pips to the upside. Prices are trading above the daily 20 SMA while the MACD is in the process of crossing to the upside. While bulls may seem to be in control on the daily timeframe, a solid NFP on Friday could swiftly quell the uptrend with prices trading back towards 1.3100.
Commodity spotlight – WTI Oil
WTI Oil descended towards three-week lows at $44.60 on Thursday as the persistent concerns over the excessive oversupply of oil in the global markets haunted investor attraction towards the commodity. It is becoming increasingly clear that investors have digested the oversupply reality with the fading optimism over OPEC securing a freeze deal in September’s informal meeting enticing sellers to attack further. U.S crude stockpiles have risen consecutively while OPEC heavyweights such as Saudi Arabia and Iraq continue to pump incessantly into a market that is already heavily saturated. WTI Crude remains fundamentally bearish with further declines expected as the combination of supply fears and soft demand encourages bears to install rounds of selling. The sharp breakdown below $46 may open a clean path towards $44.00.