GBPUSD rebounds as UK budget delayed
The pound bounces as the new premiership instils a sense of stability. Former Chancellor Sunak becomes Britain’s Prime Minister as Sterling recovers from the budget disaster. The new finance-relevant leadership gives investors hopes of better plans to tackle the mounting economic crisis. Volatility is likely to rise leading up to the new budget in mid-November. As for now, all eyes are on the BoE to deliver a 75bp hike which may add further stress to the economy. How far the rally may go would depend on how fiscal and monetary policies play out in these turbulent times. 1.1700 is the first resistance and 1.0950 a fresh support.
AUDUSD weakens on dovish RBA
The Australian dollar slips as the RBA may continue to reduce the pace of monetary normalisation. The recent bounce has more to do with a pullback in the US dollar rather than a shift in sentiment. The RBA is expected to lift its feet off the pedal with another 25 basis points hike this week. However, as inflation reaches a 32-year high, policymakers are under pressure to stay assertive. The upside risk would be a 50bp hike. Still, the contrast with the US Fed, which might deliver a fourth consecutive 75 bp rate hike in November, could keep the aussie subdued and under 0.6530. A fall below 0.6200 would lead to 0.6000.
UKOIL steadies on solid demand
Brent crude bounces higher as demand remains strong despite economic worries. There is definitely some optimism in the air. Recession concerns have abated with traders hoping for a less aggressive stance from the Fed amid weaker US data. Record US crude exports indicate that global demand has kept up. Meanwhile, Western allies’ price cap on Russian oil may have limited impact as it would be designed to keep the supply flowing. However, feeble growth in China, the world’s biggest energy consumer, could be a major headwind in the medium-term. The price is consolidating between 84.00 and 105.00.
NAS 100 struggles as risk mood ebbs
The Nasdaq recouped some losses in hope of a turnaround in the Fed’s tightening cycle. Bad news is good news these days. Signs of a slowdown in the world’s largest economy would cool expectations of sustained rate hikes by the central bank. A dovish hike from the Bank of Canada may feed hopes that the Fed could be nearing the pivot point. A retreat in Treasury yields could divert more liquidity into riskier assets. Should investors’ risk mood make its way back, growth-sensitive tech names would be the first beneficiaries. Until then, 12000 is a key hurdle and caution could drive the index to the psychological level of 10000.
