UK stocks fall as BOE rate cut fails to convince

UK stocks declined while the sterling rose after the BOE made a surprise interest rate cut. The central bank slashed rates by 50 basis points to 0.25%. It also incentivised banks to lend more money to UK companies and individuals to counter the shock of coronavirus. It did this by offering banks four years of funding at the new rate plus a fee so that they can continue lending. Also, the central bank eased the requirements to hold capital buffers, which will enable it to take temporary losses without hindering lending. Meanwhile, data from the ONS showed that the economy stagnated in January while the industrial and manufacturing production declined by 2.9% and 3.6% respectively. The construction output rose by 1.6% after rising by 5.0% in December. The FTSE declined by 40 basis points while the sterling rose by 30 basis points.

The price of crude oil declined as traders braced for an increase in supply at a time of low demand. This came a few days after talks between OPEC and its then allies broke down on Friday. In response, Saudi Arabia said that it will increase production to 12.3 million barrels per day, or 300k BPD above its maximum production capacity. Moscow said that it may boost output by up to 300k BPD and could increase it by as much as 500k BPD. Other oil producers will also continue increasing production. This is happening at a time when demand is expected to fall for the first time since 2009. Later today, we will receive inventory order numbers from the US.

The US dollar index was relatively unchanged as traders reflected on the stimulus by the US. Donald Trump has floated additional tax cuts and a tax holiday to cushion the US economy from the disease. This idea has been resisted by many democrats and republicans. Meanwhile, we received consumer price index data from the US. The data showed that the headline and core CPI were unchanged at 0.1% and 0.2% respectively in February. On an annualized basis, the headline CPI rose by 2.3% while the core CPI rose by 2.4%. 

EUR/USD

The EUR/USD pair is trading at 1.1340, which is slightly below the day’s high of 1.1366 and slightly above the day’s low of 1.1300. On the hourly chart, the price is along the middle line of the Bollinger Bands and slightly below the Ichimoku cloud. The RSI is along the neutral level of 50 while the signal line of the MACD is slightly below the neutral line. The pair may remain at these levels ahead of the ECB decision tomorrow.

XBR/USD

The XBR/USD pair declined slightly to an intraday low of 36.20, which is slightly below yesterday’s high of 40. On the hourly chart, the price is slightly below the 14-day and 28-day exponential moving averages while the RSI has started moving downwards. The average true range indicator has also continued to decline. The pair may continue moving downwards as supply issues persist. 

GBP/USD

The GBP/USD pair rose slightly after the BOE slashed interest rates. The pair is now trading at 1.2920, which is higher than the intraday low of 1.2827. This price is along the 38.2% Fibonacci Retracement level on the hourly chart. The signal line of the MACD is rising while the price is below the Ichimoku cloud. The pair could continue to rise during the American session to retest the important resistance level of 1.3000.