Market News & Analysis
EUR/GBP: Sterling downside could be limited
Fawad Razaqzada November 22, 2019 11:38 PM
If the Bank of England were voting for a rate change today, this morning’s disappointing UK PMI data may have encouraged one or two more within the Monetary Policy Committee to vote for an 'insurance' rate cut. That’s how the markets reacted today, as the pound slumped on the back of news the services PMI fell to 48.6 and manufacturing PMI eased to 48.3, both below the boom/bust level of 50.0. However, the BoE’s next policy meeting is on December 19, several days after the general election on December 12. So, it remains to be seen whether the BoE will actually cut interest rates given that the outcome of the election could have important implications in so far as Brexit is concerned. Indeed, the PMI data tends to be sensitive to Brexit uncertainty. Thus, if there is more certainty about the direction of Brexit post elections then the PMI numbers could rebound quickly. In other words, the pound may have overreacted to today’s disappointing data and could regain its poise, especially if the business-friendly Conservatives gain further ground in the polls.
However, there were no signs of a quick rebound this late in the day. So, if we are to see a comeback by the pound, it may come in the week ahead. Its best chance for a good comeback may well be against a weaker rival such as the euro, rather than the dollar, given the still-supportive US economy. Th EUR/GBP remains entrenched inside a bearish channel and with price being so close to this year’s earlier low of 0.8472, I would be very surprised if this level is not taken out in the coming days and week – barring an unexpected election surprise. That being said, the bears may wish to wait for a signal candle to form before expressing their views, given the recent recovery.
Source: Trading View and City Index.
This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.
GAIN Capital Singapore Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the GAIN Capital group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), GAIN Capital Singapore Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact GAIN Capital Singapore Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.
In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither GAIN Capital Singapore Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.
GAIN Capital Singapore Pte. Ltd. is not under any obligation to update this report.
Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit cityindex.com.sg for the complete Risk Disclosure Statement.
Cryptocurrencies are not legal tender currency and trading of derivatives on Cryptocurrencies are currently not covered under any regulatory regime in Singapore. Consequently, investors should be aware they do not have protection under the Securities and Futures Act (Cap. 289). Please ensure that you are fully aware of the risks.