Sterling bears were on the rampage during trading on Tuesday following the Bank of England’s Mark Carney’s very dovish remarks towards the health of the UK economy and this consequently sent the GBPUSD plunging to fresh seven year lows at 1.413. Sentiment towards the Pound weakened further as Carney's very blunt statement highlighting that “now was not the time to raise UK rates” instantaneously erased any remaining hopes of the BoE taking action in the near term. These latest developments add to the recurrent concerns around the slowing wage growth and stubbornly low inflation levels in the United Kingdom, while external fears around slowing global growth and the incessant decline in oil prices continue to heighten anxieties that the UK economy may be exposed to risks from abroad. The Sterling still remains under immense pressure despite Wednesday’s UK unemployment rate exceeding expectations at 5.1%, but average weekly earnings failed to jumpstart only edging 1.9% higher and this left the Sterling vulnerable to further losses.
The GBPUSD still remains bearish on the daily timeframe as 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. Bearish investors may take advantage of the short term divergence in monetary policy between the BoE and Fed and as such should encourage a further decline towards 1.4000.
Today investors may turn their focus towards the US CPI release which may provide some clarity on the level of inflation in the United States and if US consumers have taken advantage of the additional cash from the savings on gas. If US CPI exceeds expectations then market participants may be provided with further confidence around the live possibility of another US interest rate rise this current quarter.
IMF cut global growth while stocks suffer
Confidence in the global economy received a crippling blow following the International Monetary Fund’s decision to slash global growth forecasts for the third time in less than a year to 3.4% in 2016. The IMF highlighted concerns around emerging market weakness, China’s deceleration and the ongoing depreciation in oil prices as factors which have sabotaged growth and have added to the global woes.
Equity markets were left under pressure, with Asian equities concluding depressed as the heightened fears around oil price volatility and fading hopes of Beijing unleashing further stimulus measures encouraged risk adverse investors to offload stocks. This disappointment has rippled down to European stocks which are currently negative and the bearish domino effect may send American equities in a similar negative direction at the US open. Investors have become increasingly jittery while confidence in the global economy remains very low, this horrible combination may result in a further selloff across the global stock markets.
GOLD searches for direction
The sharp selloffs in the global equity markets which continuously encouraged safe-haven attention has granted a false lifeline to Gold bulls who have found it noticeable difficult to break above the psychological $1110 resistance. Despite the recent gains from the exploitation of risk aversion and shaky sentiment towards the Dollar, this commodity remains fundamentally bearish in the bigger picture. The live possibility around the fact that US interest rates may be increased on numerous occasions this year should limit how high prices go, and if Wednesday’s US CPI exceeds expectations then sellers may be encouraged to send prices lower down towards $1075.
WTI Oil under immense pressure.
The ongoing fears around the aggressive oversupply of oil in the global markets have offered ample encouragement to bearish investors who have mercilessly attacked WTI Oil to fresh 12 year lows at $28.20. This commodity is extremely bearish and the mounting anxieties around Iran returning to the heavily saturated international oil markets have haunted investor attraction consequently fading any hopes of a recovery in prices. Dollar appreciation has added to Oil woes and with still no sign of OPEC arranging an emergency meeting despite the painful depreciation in oil prices, the gates may have been opened for a further decline towards the $25.
Ruble crashes to new lows
The pain of the incessant decline in oil prices has punished the Russian economy which is heavily dependent on oil exports and this has sent the Russian ruble to a historic low against the US Dollar above 80.3 during trading on Wednesday. Sentiment towards Russia is quite bearish and with the IMF predicting that the Russian economy will contract by 1% in 2016 more declines may be expected in the Ruble.
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