British pound falls on signs of BOE cutting rates
The sterling declined today as concerns grew that the Bank of England will slash interest rates this year. This happened as the market received important data from the country. The data showed that the economy expanded by an annualized rate of 0.6%. This was lower than the previous increase of 1%. On a MoM basis, the economy contracted by -0.3% after rising by 0.1% in the previous month. In November, the industrial production contracted by 1.4%, which is a sign of a troubled economy. Industrial production has been negative for the past six months.
The manufacturing production declined by 1.7% after rising by 0.5% in the previous month. On a positive side, the output in the construction sector rose by 2.0% while the trade deficit narrowed to £5.26 billion. Part of the reason for the weak performance in November is that companies held back investments as they waited for the outcome of the December 12 election.
US futures continued to soar as traders waited for corporate earnings. Futures tied to the Dow Jones Industrial Average and Nasdaq increased by more than 126 and 50 points respectively. This week, the market will receive important earnings data from companies like Goldman Sachs, Morgan Stanley, Blackrock, and Wells Fargo among others. According to Factset, traders are expecting companies in the S&P500 to report a 2% decline in earnings. If this happens, it will be the fourth straight quarter of declining earnings. This will be the longest streak since 2015. Traders expect growth to come this year as trade tensions cool. For example, data from Factset shows that traders are expecting earnings to grow by 4.6% in the first quarter and 6.4% in the second quarter.
The GBP/USD pair continued the downward trend that started on January 2, when the pair traded at 1.3284. The pair reached an intraday low of 1.2960 after the negative growth data from the UK. As the pair dropped, it crossed the important support levels of 1.3050 and 1.3035. The RSI, which has been declining, dropped to below 30. The pair may continue to decline as traders start to price-in the first rate cut since 2018.
The EUR/USD pair declined from a high of 1.1135 to an intraday low of 1.1112. The price is along the 14-day moving averages. It is also between the 14-day moving averages envelopes indicator. The moving average oscillator, which has been declining continued to decline. It crossed the neutral level of zero. The pair has been on a downward trend as the blue trendline shows. The pair may resume moving lower.
The XBR/USD pair declined to a low of 64.40 from the day’s high of 65.30. The price is below the 14-day and 28-day exponential moving averages. The RSI has flattened, slightly above the oversold level of 30. Meanwhile, the money flow index has moved from the oversold level of 7 to the current high of 25. The price may continue moving lower in the American session.