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Market participants looking for fireworks were left disappointed when the UK government officially started the process of leaving the EU on Wednesday. The pound has weakened a tad against the US dollar, but strengthened versus the euro and is holding its own relatively well against the yen.
The recent improvement in UK data has seen many investors and analysts, ourselves included, ask a rhetorical question with a hint of sarcasm “Brexit, what Brexit?” Traders have apparently reduced their net short positions from record high levels as they realised the fallout in the immediate aftermath of Brexit was not as bad as many had feared. Granted, not all the economic pointers have been great but on the whole July has been a good month for the UK economy. However, we don’t want to jump into any conclusions as the economy works at a much slower pace than the markets. T
Oil prices swung wildly into the positive territory yesterday. The rally eventually came to a halt around the $50 handle for Brent and $48 for WTI, and both contracts have been trending lower from these levels until an hour or so ago. It looks like oil prices have now found some short-covering support ahead of today’s official US crude oil inventories report, due at 15:30 BST (10:30 ET).
Yesterday we looked at a long-term chart of the EUR/USD and highlighted the fact that the Fibre was testing a key resistance zone in the 1.1320-65 area (old support, underside of a broken bullish trend and 61.8% Fibonacci level).Today, we are looking at the technical outlook for the Dollar Index, which is a measure of the buck relative to a basket of foreign currencies.
The EUR/USD has arrived at a critical technical juncture ahead of this week’s key fundamental events, which include among other things the Eurozone PMIs (Tuesday), German Ifo (Thursday), US GDP and the Jackson Hole Symposium (Friday).
The GBP/USD ended higher last week on the back of surprisingly stronger-than-expected UK economic data and as the dollar eased along with expectations about an imminent rate hike in the US. But the Cable did sell off heavily on Friday, which took some shine off the week’s rally.
Economic data from the UK post the EU referendum has really surprised everyone this week, with inflation, jobs and now retail sales all topping expectations. It looks like Brits put Brexit miseries behind them last month as they enjoyed the relatively hot weather and splashed out on clothing and footwear, with the tourists also being encouraged by the weakness in sterling.
The official weekly crude oil inventories report from the US Energy Information Administration (EIA), released this afternoon, has confounded expectations in a positive way and oil prices have correspondingly surged to their best levels since early July. Meanwhile it is a game of wait-and-see as far the dollar is concerned and by extension buck-denominated gold, with traders largely sitting on their hands ahead of the release of the FOMC minutes later on today.
After the surprisingly strong UK inflation figures on Tuesday, the jobs and wages data released today confounded expectations once again, albeit to a lesser degree.
The UK inflation figures were stronger than anticipated, with headline CPI rising at a 0.6% rate rather than 0.5% that had been widely expected. The impact of Brexit was very clear as a significantly weaker pound caused the price of goods and raw materials purchased by manufacturers to soar.
Last week was another “risk-on” one for the markets, even though global economic data was poor. Disappointing data did however underline expectations of continued ultra-accommodative monetary policy from global central banks. This underlying theme remains valid at the start of this week.
Friday’s macro data from the world’s largest economies goes to show why the major central banks are still uber-dovish
The USD/JPY will soon either break down further or bounce sharply from around the technically-important 100-101 area
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