Investor sentiment towards the Sterling continues to weaken ahead of the anticipated Bank of England (BoE) rate decision today, in which markets broadly expect rates to be left unchanged at the record 0.5% low. Since the MPC’s December meeting, the overall outlook for the UK economy has dimmed considerably with a downwards revision of Q3 GDP and a decline in industrial productions renewing concerns around the potential slowdown in economic momentum in the United Kingdom. The additional disappointment from slowing wage growth combined with the heightened fears around the static inflation levels which are well below the BoE’s 2% target have also reduced any hopes of UK interest rates increasing in this current quarter. While domestic issues continue to haunt investor attraction towards the pound, global developments regarding the aggressive selloff in oil prices and China’s slowdown, along with emerging market weakness and poor growth overseas are heightening anxiety that the UK economy is at risk from threats abroad.
Market participants may turn their focus towards the Monetary Policy Committee’s meeting minutes in an attempt to gain clarity on how the officials voted and whether the recent global events have created a dovish outlook for the future. The Sterling is already under immense pressure and with anxieties still lingering over the possible vote for the UK to leave the Eurozone, the BoE has been provided with yet another reason to leave rates unchanged, and as such this should reduce investor attraction towards the pound.
The GBPUSD is heavily bearish and this short term interest rate differential between the Bank of England and Federal Reserve should encourage sellers to attack. From a technical standpoint, there have been consistently lower lows and lower highs. Prices are currently trading below the daily 20 SMA while the MACD has crossed to the downside. Previous support at 1.4500 may become a dynamic resistance which should encourage a further decline towards 1.4300.
WTI Oil balances above $30
WTI Oil encountered another aggressive depreciation on Wednesday with prices edging closer to the psychological $30 support following reports from the Energy Information Administration showing a huge increase in gasoline stockpiles. Oil remains under intense pressure and this latest sharp rise in Gasoline stockpiles has intensified the growing concerns around the excessive oversupply in the markets which is consequently encouraging sellers to attack prices further.
The punishment of falling oil prices has already caused conflicting opinions between OPEC members with Nigeria’s minister of state for petroleum resources, Emmanuel Kachikwu, previously suggesting an emergency meeting, but this proposition was briskly rejected by UAE Energy Minister Suhail bin Mohammed al-Mazroui, who believes that OPEC’s strategy is working effectively. It remains very clear that OPEC is willing to leave production unchanged and with no clear signs of an emergency meeting taking place despite the aggressive decline in prices, it may only be a matter of time before WTI breaks below $30.
From a technical standpoint, prices are heavily bearish on the daily timeframe as there have been consistently lower lows and lower highs. Prices are trading below the daily 20 SMA and the MACD has also crossed to the downside. A solid daily close below $30 may encourage sellers to send prices towards $29.
The EURGBP is heavily bullish on the daily timeframe as there have been consistently higher highs and higher lows. Prices are trading above the daily 20 SMA and the MACD has also crossed to the upside. Previous resistance at 0.7500 should become a dynamic support which should encourage buyers to send prices towards 0.7600.
The GBPJPY is heavily bearish on the daily timeframe as there have been almost 6 consecutive weeks of declines. A breakdown below 170.00 should encourage a further decline towards 168.00.
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