POUND ERASES GAINS AFTER THE BOE HIKED INTEREST RATES AS EXPECTED
The pound jumped sharply after the Bank of England (BOE) raised interest rates. This was the second interest rate hike since the financial crisis. It was an indication that the BOE officials were confident that the economy would withstand a rate hike despite the huge challenges the country is facing. The country is still having challenges dealing with Brexit as opposition grows towards Theresa May’s soft Brexit. The country’s manufacturing industry has also been affected by the ongoing trade disagreements. Last month, the PMI data showed the PMI at 54.0, which was lower than the previous month’s 54.3.
The dollar rose today after the Federal Reserve left interest rates unchanged yesterday. This was expected from the central bank so, traders were waiting for the outlook for next year. The bank indicated that the outlook for the economy was strong, which means that there is a likelihood that the third rate hike will happen in September and the fourth one in December. In 2019, the bank is expected to make two more hikes, lower than this year’s four.
It was a sea of red in the world’s stock markets as the fear of trade war returned to the markets. In Asia, the Shanghai Composite, Hang Seng, and Nikkei declined by 2%, 2.20%, and 1% while in Europe, the DAX, CAC, and FTSE fell by 1.55%, 0.65%, and 1% respectively. The Euro Stoxx index fell by 1.10%. In the US, futures point to a lower open with the Nasdaq, Dow, and S&P falling by 0.76%, 0.62%, and 0.55%. The declines today came after the US threatened additional tariffs to Chinese goods.
The EUR/USD pair fell below the important support of 1.1618 and reached an intraday low of 1.1600. This decline came after the Fed signalled more hikes this year. This price is below the 50 and 25-day Exponential Moving Average (EMA) index. The RSI reached an intraday low of 15, but it has risen slightly to 23, which is within the oversold level. There is a likelihood that the pair will remain within this narrow range. Declines below the support of 1.1600 will mean that the pair could continue to decline.
The GBP/USD pair rose to an intraday high of 1.3124 after the BOE made its interest rates decision. As of writing, the gains have been wiped and the pair is trading at an intraday low of 1.3016, which is the lowest level since July 20. The decline was mainly because of bullish traders who took profits after the rate decision and the statements of Mark Carney. Further declines on the pair will see it test the support of 1.2993 and if it continues to move lower, it will test the support of 1.2955.
Yesterday, the USD/JPY pair reached a high of 112.15. Today, the pair has declined and is trading at 111.40. At this price, the pair is trading below the 50 and 100-day EMA and the parabolic SAR indicator is pointing to more declines. The RSI is currently at 30. This means that the pair is likely to continue moving lower but upward movements could also be possible as bears exit their trades.