Pound shaky ahead of EU Summit

17 October, 2018

Stocks in Asia were broadly higher today after upbeat U.S. corporate earnings and encouraging economic data elevated Wall Street overnight.

Some semblance of stability is likely to return to financial markets this week as earnings season offers investors a short-term distraction away from trade tensions and global growth fears. Although robust earnings are poised to instil equity bulls with a renewed sense of confidence, the underlying factors weighing on stock markets remain present. With U.S.-China trade disputes, concerns over plateauing global growth, Brexit-related uncertainty, geopolitical tensions and prospects of higher U.S. interest rates still in the mix, equity bears have plenty of ammunition.

European Union summit in focus


With just over five months left until the official Brexit deadline, markets and investors are still scrambling for clarity with many questions still unanswered.

Over the next few days investors will be keeping a very close eye on the EU summit which could provide some direction on Brexit. With a deadlock on the Northern Irish border issue seen as a major obstacle in Brexit talks, there is little hope for a breakthrough at the EU summit. If the summit concludes with no real progress made on negations, this simply raises the risk of a no-deal Brexit outcome. Given the Pound is extremely sensitive to Brexit headlines, such a scenario could send the currency collapsing like a house of cards.

Dollar gains ahead of Fed minutes


Buying sentiment towards the Dollar took a slight hit on Tuesday after Donald Trump once again criticised the Federal Reserve, stating that it was his ‘biggest threat’ because it is raising rates too fast. However, the Dollar’s downside was limited by positive U.S. industrial production figures which boosted sentiment towards the U.S. economy. Although Trump’s repeated criticism of the Fed is unlikely to impact the central bank’s interest rate hiking path, it could continue weighing on the Dollar.

Today’s main event risk for the Dollar will be the Federal Open Market Committee meeting minutes which investors will closely comb through for clues on rate hike timings beyond December. The Dollar could be given an opportunity to rebound if the minutes come across as more hawkish than expected.

The Dollar Index has staged an impressive rebound from the 94.80 level with prices trading towards 95.20 as of writing. Bears need to break below the 95.00 support level for prices to sink towards 94.60. Alternatively, an intraday breakout above 95.30 could trigger a move higher to 95.44.

Commodity spotlight – Oil


Oil prices seem to be witnessing some stability as U.S.-Saudi tensions ease with investors redirecting their focus towards looming sanctions against Iran and a surprise decline in U.S. Crude inventories.

U.S. sanctions against Iran’s oil exports and falling production from Venezuela are two likely factors to push oil prices higher this quarter. Geopolitical risk factors may spark uncertainty over the global supply outlook – ultimately fanning fears of possible supply shocks. Although the current market conditions favour higher oil prices, global trade tensions still remain a threat to oil bulls down the road. Heightened trade disputes between the world’s two largest economies represent a threat to global growth. Slowing global growth in the event of a full-blown trade war will most likely dent demand for crude.


Source  
Gold explodes higher on fresh risk aversion

Gold staged an incredibly rebound on Tuesday, jumping over 1% against the Dollar after U.S President Donald Trump said that a trade deal with...

Events to keep an eye on for week ahead

Investors kicked off the last month of the year in a positive mood. Stocks across Asian markets traded in the green on Monday with 10-year US Treasury...

Risk-off mood hovers over Asian markets

Risk-off mode continues to cast a cloud over Asian assets, as media reports pour cold water on hopes that a US-China trade deal can be sealed...


Pound boosted by Brexit party decision

Sterling exploded higher on Monday, gaining roughly 0.8% against the dollar after the Brexit party said it would not contest Conservative seats in the...

What to watch when Fed meets this week

After lowering interest rates twice in 2019, investors across all asset classes are awaiting the FOMC rate decision when it wraps up its two-day meeting...

Pound in focus as Brexit saga goes on

The Pound remains in the spotlight, as investors brace for more political drama surrounding Brexit. Although UK Prime Minister Boris Johnson has...


Dollar index drops after US retail sales contraction

The Dollar index (DXY) immediately fell by some 0.2 percent, dropping below the 98.0 psychological level once more...

Dollar's fall halted at 98.4 support level

The Dollar index (DXY) fell by about 0.38 percent before paring back losses, as the 98.4 support level kicked in. Although the September US inflation...

Dollar paring early October losses

The Dollar index (DXY) continues to pare losses seen earlier this month, as investors await the minutes from the September FOMC meeting...