Sterling falls as new BOE governor pledges “prompt action”
Global stocks wobbled today as market participants remained worried about the US economy. In Europe, the DAX, CAC, and FTSE dropped by more than 1%. In the United States, futures pointed to a higher open, with the Dow expected to gain more than 200 points. In Asia-Pacific, the ASX rose by more than 5% while China A50 declined by 75 basis points. Today’s price action came a day after the Dow had its worst day since the 1987 flash crash. The current jitters in the market are about the state of the economy and whether governments will provide enough support to affected companies.
The price of gold declined today in a continuation of a sell-off that started on Monday last week. The reasons for the sell-off are not yet clear since all fundamentals appear to support the metal. The Fed has lowered interest rates and global risks have increased. The likely reason is that investors are selling gold in large numbers to cover their margin calls. This could also be the reason why Bitcoin, another so-called safe-haven, has declined by more than 35% in the past five days. Another reason is that gold holders are converting it into cash as more people in the developed markets stay indoors.
The sterling declined today as traders continued to reflect on the impact of covid-19. Data from the ONS showed that the unemployment rate increased to 3.9% in January from the previous 3.8%. In the same month, the claimant count increased by 17.3k, which was slightly lower than the expected 21.4k. This number will likely continue to increase as the disease spreads in the UK. Elsewhere in Europe, the German ZEW current condition data declined from the previous 15.7 to 43.1 while the economic sentiment declined to 49.5. In the United States, retail sales declined by 0.5% in February while the core retail sales declined by 0.4%.
The GBP/USD pair declined by more than 1.40% as coronavirus cases continued to increase in the UK. The new BOE governor has also pledged quick measures to support the economy. The pair reached an intraday low of 1.2100, which is the lowest it has been since September 10. The price is along the lower line of the Bollinger Bands while the ATR has soared. The pair may continue experiencing some volatility during the American session.
The EUR/USD pair declined below a key support after the negative survey data from Europe. The pair dropped to an intraday low of 1.0978, which is its lowest level since February 28. The pair moved below the important double bottom level of 1.1053. It is now below all the short and medium-term moving averages while the RSI has moved to the oversold level of 21. The pair may continue falling during the American session.
The XBR/USD pair declined to an intraday low of 30.89, which is the lowest it has been in several years. The price is below all the short, medium, and long-term moving averages while the RSI is slightly above the oversold level of 70. The signal line of the MACD is below the centreline. The pair may continue moving lower on demand and supply concerns.