Global Markets: The majority of global equity markets are continuing their recent upturn in form, with the change in momentum and gains seen late last week continuing into the new trading week. It is a surprising change in sentiment when you consider that the same global economic woes that caused severe pressure to the markets at the end of the last quarter are still remaining, and yet there is a noticeable improved sentiment in the equity markets.
I would however, remain vigilant towards another sudden shift in momentum because there are still elevated concerns when it comes to the pace of growth in the global economy. The same threats to investor sentiment remain present in the atmosphere with this including complete confusion over the anticipated timing of a US interest rate rise, concerns over China entering an even deeper economic downturn, minimal growth in both Europe and Japan, alongside depressed commodity prices. All of these market risks are evident at the same time, which is precisely why I still believe that the markets are vulnerable to sudden losses.
GBPUSD gets slammed
After benefiting from the USD weakness at the end of last week, the GBPUSD suffered a sudden reversal of gains following some unexpectedly weak economic data from the UK economy. The Services PMI for September was announced far below expectations, and this increased concerns that even the consistently robust UK economy might be at risk to suffering from a decline in economic momentum. Overall, the GBPUSD dropped by over 100 pips on the first day of the trading week to trade around 1.5136.
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Technically speaking, the 1.51 level is seen as a potential “bottom” for the GBPUSD and we could encounter another bounce higher from here. The main downside risk that GBPUSD faces is another risk-off trading attitude from investors because that would spell further downside pressures for the pair. While 1.51 is seen as a bottom for the GBPUSD right now, if it breaks it would not take very long at all for the GBPUSD to threaten a fall below 1.50.
Commodities
After managing to jump close to $40 on the USD weakness following a largely disappointing US jobs report, Gold is managing to maintain itself above $1130. There is little doubt that the weak NFP from the United States has weakened the argument for a US interest rate rise and as US interest rate expectations continue to be pushed back in the mid-term, Gold should benefit from an improved sentiment. I personally don’t think that it has been priced into the USD yet that the chances of a US interest rate rise this year are narrowing each passing week, which is encouragement if you are a Gold investor.
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WTI Oil is still attempting to build up some positive momentum, despite concerns over the global economy remaining as a recurring theme. The commodity finds currently finds itself priced just above $46, which is a $2 dollar gain following confirmation to investors that the previous regularly touched $44 level has installed itself as a stubborn support level. With the regularly repeated signs of an aggressive oversupply in the markets that has acted as the dominant threat to investor sentiment for the past year remaining, I doubt WTI can rally much higher in the short-term.
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