A renewed sell-off in oil prices amid oversupply concerns effectively dented risk sentiment on Wednesday with global stocks exposed to heavy losses as oil bears pressured equity bulls. European markets were punished by the sharp decline in energy shares and the bearish contagion was swift to contaminate Wall Street which concluded mostly lower. Although Asian stocks edged cautiously higher during Thursday’s trading session, the lack of appetite for risk may limit upside gains.

It seems oil prices have a firm grip on the financial markets with equities retreating and risk aversion intensifying when the commodity tumbles. With depressed oil, ongoing Brexit developments and political instability in the US still weighing on sentiment, a pending stock market correction could be on the cards.

BoE’s Haldane enters the scene  

Sterling volatility may intensify in the coming weeks as Brexit talks, the formation of a UK coalition government and an interest rate tug of war between BoE policymakers get underway. It was only on Tuesday that Mark Carney inspired bears when he suggested that “now is not yet the time to raise interest rates,” but on Wednesday bulls received a pleasant surprise after BoE’s Andy Haldane offered a hawkish lifeline. With Haldane widely viewed as one of the more conservative members of the BoE when it comes to rate increases, his comments on backing a rate hike this year were seen as a big deal. Although the expectation of higher rates could support the British Pound, gains are likely to remain limited by UK political risk and uncertainty over Brexit.

Speaking of politics, Theresa May jets off to Brussels on Thursday where she is expected to provide the European Union leaders insight on the rights of EU citizens residing in Britain after Brexit. Although the outcome of May’s meeting in Brussels remains another uncertainty, sellers can capitalize on this to drag Sterling lower. From a technical standpoint, the GBPUSD currently respects a bearish channel on the daily charts. A breakdown below 1.2600 should encourage a further selloff towards 1.2450.

Dollar Index hovering around 97.50

The Dollar Index retreated from a one-month high against a basket of currencies during Wednesday’s trading session as a selloff in Wall Street encouraged some traders to profit take. Although the Greenback roared back to life at the start of the week following hawkish comments from a Fed official, price action currently suggests that Dollar bullish investors are lacking the inspiration to support prices further. Investors may direct their attention towards the pending unemployment report from the U.S this afternoon which could pump some life back into the Dollar if unemployment claims fall. From a technical standpoint, the Dollar Index is at risk of trading lower if bulls fail to break above 98.00.

Commodity spotlight – WTI Oil

WTI Crude was exposed to steep losses during Wednesday’s trading session as sellers exploited the persistent oversupply concerns to initiate fresh rounds of selling. The bigger-than-expected decline in U.S Crude stockpiles did little to quell the selloff with technical traders utilizing the technical bounce to drive prices lower. With the “bear market” in Crude attracting bearish investors to the commodity like bees to honey, further downside should be expected moving forward. From a technical standpoint, WTI is extremely depressed on the daily charts and a breakdown below $42 should encourage a further decline towards $40.