U.S. Dollar Strengthens As UK Scrambles To Stabilize The Economy
2022.10.11 08:22
The US Dollar remains in control for a fifth consecutive day. Investors have not priced in lower or a less restrictive Federal Reserve. The reached a new price high for October and continues climbing towards its yearly high at 114.10. This morning, USD saw its strongest gains against the .
The price of formed a retracement towards the end of the US trading session declining by 3.29% within 5 hours. However, this morning the price has traded in a narrow price range between $90.30 and $89.51. Traders will be looking at this price range for potential indications of either bullish or bearish breakouts.
Moving onto the cryptocurrency market. The price of is slightly lower this morning and has declined by 3.65% over the past five days. It’s being influenced by the ‘risk off’ sentiment across all markets and the recent hacker attack on the Binance Smart Chain Network.
The attack resulted in the loss of 2 million BNB tokens, which does not directly affect Bitcoin but can create an overall poor sentiment within the market. The total market capitalization for the cryptocurrency market was $954 million on Friday, slightly higher than the week before.
GBP/USD – Technical View
The price of the GBP/USD pair saw high levels of volatility and a lack of a clear breakout direction. GBP/USD broke out in both directions and corrected on both occasions.
This is not surprising, considering the price movement is mainly triggered by news from the Bank of England. Currently, the price is trading 33 PIPs lower than the market open and has formed a clear support level at 1.1018.
One of the biggest concerns following the chancellor’s fiscal policy expansion was the bond market’s reaction, known as GILTS in the UK. This very quickly developed into the current UK bond market crisis, which prompted a response from the Bank of England. A strong sell-off triggered the crisis after investors feared the UK government would fall into a deficit.
The Bank of England confirmed this morning that it’s looking to expand its bond market intervention and will now include purchases of index-linked gilts. In simple terms, this means that the government is buying up government debt to try and stabilize the market. It’s similar to Quantitative Easing.
The GBP is also influenced by this morning’s , which unexpectedly rose to 25,500, indicating labor weakness. UK’s CCC is now at a 19-month-high and considered negative for both the Pound and the UK indices. However, the had declined to 3.5%, potentially due to the new Prime Minister threatening to reduce certain government benefits.
S&P 500 – Technical Outlook
The formed its fourth bearish trading session and significantly declined during this morning’s futures trading session. The decline during the future trading session can indicate the day’s “risk off” sentiment, as all US indices are currently in the red.
The price of the S&P 500 has formed a “double bottom” this morning, which is now a clear support level for the price. However, the price movement and investor decision on whether to buy, sell, or hold will largely depend on Thursday’s inflation figures.
Even though the latest inflation figures will strongly influence the price, investors are also concerned about several other factors. This includes the sudden spike in the price of the US Dollar as well as the price of oil.
Higher oil prices will likely increase expenditure and eat into consumer spending budgets. Lastly, investors are still concerned about the slowdown in the Chinese economy. The Chinese Caixin September , published on Saturday, fell from 55.0 points to 49.3 points and ended up in a stagnation zone.
