GBP Recovers As Oil Collapses Further

Today’s main financial calendar event will be the ISM Manufacturing from the US as well as UK PMI numbers from the UK. Yesterday saw the Bank of Japan keep rates unchanged and mentioned that risks to economic activity and to inflation were on the downside, suggesting a continued easing bias. Bank of England governor announce that he would extend his term to June 2019. Polls show that Donald Trump also gained after the latest email scandal, however Hillary is still in the lead. Also, earlier this morning Australian Central Bank kept rates unchanged. The market is likely to trade in narrow ranges ahead of the FED rate decision tomorrow and Friday’s Non-Farm Payrolls Report. 

Currencies: The dollar weakened versus the EUR and GBP yesterday as the aftermath of the email investigation still weighs on investor sentiment. EURUSD is set to find resistance at 1.1035 while support is to be tested at 1.0940. GBPUSD moved to 1.2240 highs yesterday. The pair remains in a tight 1.2114 – 1.2273 range, Yesterday, BoE governor Mark Carney announced that he has extended his term until the June 2019. While this should provide certainty on the monetary policy front during the difficult Brexit negotiations, it also means we will have a relatively dovish BoE, which could point to a weaker GBP.

Stocks: Overnight, U.S. stocks were lower after the close on Monday, as losses in the Oil & Gas sectors led shares lower. The Dow Jones declined 0.10%, while the S&P 500 lost 0.01%, and the Nasdaq lost 0.02%. This morning, European stocks gapped higher by 0.5% on news that the Chinese economy posted significant gains.

Oil and Gold: Oil prices reached $46.62 yesterday, a 1-month low after OPEC discussions seemed to be in a limbo, however prices recovered slightly today after OPEC agreed on a long-term strategy that was seen as an indication the cartel was reaching a consensus on managing production. Gold prices reached $1280 from as low as $1271 as the USD weakened and investors turned to the yellow metal for safety amid the political instability.