GBP: Bank's Of England Plans Underwhelms Traders. UK Has To Face Energy Crisis And More

"Private investors will be required to increase their gilt exposure by at least £268bn in FY2023-24"

Maximum effort Global super-sized hikes give dollar breathing room

GBPUSD hits 30-month low as recession looms

The pound suffers from a symptom of high inflation and high interest rates. Expectations of steep rate hikes by the BoE fails to impress traders who tend to shy away from risk assets. Britain is facing strong headwinds in the shape of recession, soaring government spending and an energy crisis. The market fears that a 50bp increase would dampen consumer and business confidence and put growth at risk, a hefty cost for taming inflation. Meanwhile, the US dollar is backed by a sound economy and its safe-haven appeal, meaning that cable could stay subdued. 1.1420 is a critical support from March 2020 and 1.2100 the first resistance.

GBP Is The Currency Of Great Britain

EURUSD steadies on hawkish ECB

The euro reclaimed parity following hawkish comments from the ECB. The central bank lifted rates by a record 75 basis points. Speculations run that another super-sized 75bp could be on the table next month. Now that the Europeans are on the same page as their US counterpart, a halt to the widening rate gap could prevent further bleeding in the exchange rate. However, the downside risk remains as the bloc is heading into a tough winter with soaring energy bills and debt burdens. A correction in the greenback may struggle to trigger a sustained recovery. 1.0320 is the first resistance and 0.9800 a close support.

USOIL falters over weak demand

WTI falls as traders fear that a recession is right around the corner. Lacklustre August trade numbers from China suggest more headwinds for the global economy. Exports lost steam due to softening demand from the US and EU while local lockdowns and weak consumer sentiment weigh on imports. Slower growth in China, the second largest oil consumer, may keep the market on its toes. In the meantime, major central banks’ relentless push for tighter financial conditions to fight inflation could be the straw that broke the camel’s back, making recession a reality. The price could be capped at 97.00 and heading towards 75.00.

Crude Oil

NAS 100 slips over tighter monetary policy

The Nasdaq 100 stalls as the prospect of a prolonged downturn weighs on risk assets. The Fed is expected to raise rates by another 75 basis points at its September meeting. With growing signs of an economic slowdown in Europe and China, investors are wondering whether central banks might push too hard and send the world’s economy overboard. The combination of a global downturn and a hawkish Fed may keep restraining anyone’s enthusiasm in growth-sensitive stocks. The downside risk would be a complete reversal of July’s rally below the critical floor at 11400, thus confirming a bearish market. 13160 a fresh resistance.

  - 09.09.2022 - 1

Key data release (GMT time)

Tuesday, 13 September  - 09.09.2022 - 2

06:00 ILO Unemployment Rate

Harmonized Index of Consumer Prices  - 09.09.2022 - 3  - 09.09.2022 - 4

12:30 Consumer Price Index

Wednesday, 14 September  - 09.09.2022 - 5

06:00 Consumer Price Index  - 09.09.2022 - 6

22:45 Gross Domestic Product

Thursday, 15 September  - 09.09.2022 - 7

01:30 Unemployment Rate

11:00 BoE Interest Rate Decision  - 09.09.2022 - 8

12:30 Retail Sales  - 09.09.2022 - 9

Friday, 16 September  - 09.09.2022 - 10

14:00 Michigan Consumer Sentiment Index

"Private investors will be required to increase their gilt exposure by at least £268bn in FY2023-24"

Jing Ren

Jing-Ren has extensive experience in currency and commodities trading. He began his career in metal sales and trading at Societe Generale in London. Later on he worked as a senior analyst within the FX brokerage industry where he developed strategies in trading and risk management. With solid understanding of market dynamics he founded Wensfer to offer research and asset management services.