The Pound’s recent volatility provides a good illustration of the current situation, in which the possibilities of there being no trade deal at the end of the Brexit transition period and the Bank of England introducing negative interest rates early in the new year dominate the sentiment of traders. Both scenarios would be negative for the currency while any hints pointing in the opposite direction will support it.
Investors are staying tuned-in and reacting to any meaningful development and that’s why sterling rose versus both the dollar and the euro on Monday and early on Tuesday following declarations from a senior EU official underlining the block’s commitment to a negotiated outcome, despite the UK’s Internal Market Bill remaining an obstacle.
As soon as the dollar’s recovery stopped, gold has been able to rebound, consolidating the strength of the support placed at $1,850-$1,860. Indeed, as long as the price remains above this threshold the main trend remains positive, while a decline below $1,850 would denote some further weakness.
From a fundamental point of view, despite the recent slowdown of the price, ETF demand remains stellar, while central banks are still printing money in order to mitigate impact of the economic crisis generated by COVID, a scenario that is likely to last for at least all of 2021. In other words, nothing has really changed and the 10% decline registered by gold from the peak of August still looks like a significant correction or a consolidation pause, but not a proper inversion.
Share markets traded lower on Tuesday in Europe, correcting Monday’s jump where market sentiment was broadly boosted by the latest US stimulus effort. Almost all benchmarks drifted lower, led by the financial sector, as despite some positive developments on a day-to-day basis, investors still lack long-term clarity.
Today’s agenda isn’t particularly busy even if investors will pay attention to the US CB Consumer Confidence release for September, due later in the afternoon, as well as this evening’s crucial first debate between President Trump and Joe Biden. Biden is expected to lay out his strategies on key matters such as the US’ relationship with China, which would provide investors with more clues on what to expect if he wins the election.
The IBEX-35 Index in Madrid is one of today’s worst performers with the banking sector, notably Banco Santander leading declines.
IBEX-35 Index chart
Pierre Veyret– Technical analyst, ActivTrades
Disclaimer: opinions are personal to the authors and do not reflect the opinions of LeapRate. This is not a trading advice.