STERLING CONTINUES THE UPWARD MOMENTUM AFTER BOE STATEMENT
Sterling continued the upward trend started yesterday after the Bank of England (BOE) released its interest rates decision. As expected, the bank left interest rates unchanged at 0.75%. In the statement, the bank said that the country was going through three transitions. The first transition is on Brexit where the country is separating itself with the EU. The second is the UK’s fiscal policy, which is moving towards accommodation. The third is about trade where the country is adjusting itself to the new order of protectionism. On the future of interest rates, the bank said that a hike will depend on the demand, supply, and the value of the pound.
The USD fell against the peer currencies after huge gains in October. The dollar index fell by 70 basis points. It fell by 80 and 120 basis points against the euro and the sterling. This came after yesterday’s better-than-expected jobs numbers from ADP. Tomorrow, the Labor department is expected to show that the economy added 190K jobs in October. This will be better than the 134K in September. Today, the data showed that the initial jobless claims fell to 214K. This was worse than the consensus estimate of 213K but better than last week’s 216K. The continuing jobless claims rose to 1,631K, which was better than the expected 1,640K. In addition, the productivity rate rose to 2.2%, which was in line with expectations.
The price of crude oil continued declining today after the inventory data showed increasing stocks. Data from the Energy Information Administration (EIA) showed that stocks rose by 3.12 million barrels. This was lower than the consensus estimate of 4.11 million barrels. It was also lower than the API data that showed inventories of more than 6 million barrels. While the build-up was lower than expected, traders were worried about the trend in supplies.
The EUR/USD pair rose sharply to an intraday high of 1.1405. Today’s increase was expected because the pair had just reached an important support of 1.1300. The double EMAs have started changing direction. This is an indication that the new upward trend will likely continue. If it does, the pair is likely to test the important resistance level of 1.1560, which is the 50% Fibonacci Retracement level.
The GBP/USD pair rose today to an intraday high of 1.2932. This was a big rally, but one that was expected. After weeks of declines, the pair reached an important support level of 1.2690. Today’s high was along the 38.2% Fibonacci Retracement level. The upward trend is likely to continue following today’s BOE decision. If it does, in the short term, the pair will reach the 50% Fibonacci Retracement level of 1.3000.
The price of crude oil declined sharply today with the XTI/USD pair reaching an intraday low of 64.59. This was the lowest level since August 15. The moving averages and the Bollinger Band show that the pair is likely to continue the declines. If it does, it will possibly reach a low of 63.3. However, there is a need for caution among traders shorting the pair as there is a likelihood that the pair could start a reversal at any point now. This could happen as bulls take over as prices fall.