The rising expectations of further monetary stimulus from the Bank of England to quell the Brexit chaos has enticed bears to install repeated rounds of selling consequently leaving the Sterling vulnerable to heavy losses. Sterling remains under immense pressure with weakness becoming a dominant theme as uncertainty haunts investor attraction towards the currency. Sentiment is firmly bearish towards the pound, and the awful combination of soft domestic data coupled with heightened hopes of the BoE cutting UK rates to near zero should ensure prices remain depressed for an extended period.

Investors may direct their attention towards Tuesday’s CPI report for July which could offer further clarity on how the UK economy is faring post-Brexit. Inflation has been notoriously static in the UK and the pound could be left open to further losses if the pending CPI follows this negative pattern. From a technical standpoint, the GBPUSD is bearish as there have been consistently lower lows and lower highs. A decisive break down below 1.2900 could open a path towards 1.2800.

Global stocks driven by sentiment

Stock markets were elevated by oil’s resurgence on Monday with most major arena’s hovering around yearly highs as the renewed risk appetite attracted investors to riskier assets. This up move was short-lived on Tuesday as most Asian markets descended back into losses following Yen’s resurgence which weighed heavily on the Nikkei. Although European markets started the week on a solid footing, the combination of cooling oil prices and risk aversion could drag European stocks lower. The pattern of stocks wildly swinging between losses and gains is becoming a theme in the markets which raises questions over the sustainability of the stock market rally. It is becoming increasingly clear that the engine which is powering the impressive gains is sentiment, rather than fundamentals, and this should force investors to remain diligent.

Japan Q2 GDP nearly stalls

Sentiment towards the Japanese economy was dealt a frightening blow on Monday following the soft second quarter GDP of 0.2% which rekindled concerns over the health of the world’s third largest economy. Weak consumer spending and falling exports amid Yen’s resurgence heavily eroded Japan’s GDP while the ongoing global uncertainties continued to expose the nation to downside risks. With inflation following a tepid path, expectations have already mounted over the Bank of Japan implementing further monetary stimulus to revive economic growth.

The Yen could appreciate further if risk aversion from global growth concerns encourages bulls to pounce. From a technical standpoint, the USDJPY is bearish on the daily timeframe and a breakdown below 100.00 could open a path towards 99.00.

WTI rebound towards $46

WTI Crude displayed an incredible rebound during trading on Monday with prices lurching towards $46 as expectations over a potential OPEC production freeze deal encouraged bulls to attack. Oil prices are becoming increasingly sensitive to production freeze talks with bulls exploited the sharp speculative boosts in prices. Although the current upside gains are impressive, WTI still remains fundamentally bearish with the oversupply concerns encouraging bears to drag prices lower. If the informal meeting in September concludes without a deal in place, then WTI Crude could trade towards $35. From a technical standpoint, bears need to break below $42 for a path towards $40.

Commodity spotlight – Gold

Gold has been placed on a chaotic roller coaster ride with prices sharply swinging between losses and gains as expectations fluctuate over the Fed raising US interest rates in 2016. The metal is engaged in a fierce tug of war with risk aversion keeping prices buoyed while Dollar’s resurgence hammers prices lower. Gold is searching for direction which could be provided this week ahead of the influx of US economic data. From a technical standpoint, bulls need to keep above $1315 to maintain the daily bullish uptrend.