General market theme
Sentiment turned bearish again yesterday in a day that was market by two UK-related developments: BoE Governor Carney opening the door to a key interest rate cut in the months to come and Boris Johnson’s decision not to run for Prime Minister. The BoE Governor made word for a lower rate policy in order to support the domestic economy that took a hit on the back of the Brexit referendum and it expected to be under pressure in the medium term future as Britain leaves the UK. On the other hand Johnson’s decision not to run for PM after being the main spokesperson for the Leave campaign adds to the political uncertainty in the UK which of course makes investors more nervous and the markets trading in a choppy manner.
Price action highlights
The euro edged higher in the morning session but after reaching the 200-period moving average around the 1.1150 area it reversed its flows and declined. The correction took the euro down to the 1.1020 area from where yet another reversal started and the euro finally ended the day unchanged. These changes in direction reveals investors’ nervousness on the back of the fresh developments in the EU and the clear lack of a broader bias at this time as Europe is facing an uncertain second half of the year with the Leave negotiations taking place and the painful division between the European Union and one of its most powerful members.
The cable enjoyed a couple of days moving higher but yesterday Carney’s remarks regarding a lower interest rate policy could not but take their toll on the UK currency, the rate dropped back below the 1.3500 mark to trade almost 300 pips lower as traders realize that the pound’s problems might still be just starting. At any case the outlook for the sterling is bearish, we might see light trading action today but starting next week the UK currency will be under pressure again leading up to the NFP report scheduled for release on Friday.
Focus of the day
A number of Manufacturing PMI reports from around the world are on our docket today along with the Unemployment figures from the Eurozone. The German and Eurozone Manufacturing PMI levels today could go unnoticed by traders that are eyeing next week’s NFP report expected to print in a bullish manner. At the same time a strong PMI reading from the US could add to the expectations for a bullish dollar rally ahead of the NFPs next so the focus will be on the dollar today.
Disclaimer: The information provided by InvestingBetter.com should not be relied upon as a substitute for extensive independent research which should be performed before making your investment decisions. InvestingBetter.com are merely providing this information for your general information. The information and opinions presented do not take into account any particular individual’s investment objectives, financial situation, or needs. All investors should obtain advice based on their unique situation before making any investment decision and should tailor the trade size and leverage of their trading to their personal risk appetite.
InvestingBetter.com and/or its owners will not be responsible for any losses incurred on investments made by readers and clients as a result of any information contained on InvestingBetter.com. InvestingBetter.com does not render investment, legal, accounting, tax, or other professional advice. If investment, legal, tax, or other expert assistance is required, the services of a competent professional should be sought.