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Sterling depressed ahead of UK Budget speech

Article by ForexTime

Sterling bears were unleashed during Wednesday’s trading session, with the GBPUSD sinking to a fresh seven-week low at 1.2150 as investor anxiety heightened ahead of the UK spring Budget speech. Treasury chief Philip Hammond will be in the limelight today, and is set to provide some insight on the UK government’s financial plans as it embarks on its quest to exit the European Union. Although Hammond has stated that he may adopt a cautious approach in the spring Budget to ensure that the UK is safeguarded from Brexit, rapidly rising Brexit-fuelled uncertainties have already negatively impacted sentiment.

With there being a live threat of the UK economy facing serious long-term risks from Brexit, fiscal discipline should be maintained, with the government potentially holding back on any spending increases. While some may be optimistic over the upgraded growth forecast for 2017 and are likely to receive reassurance from Hammond on the bright future of the UK economy, most participants remain jittery from the recent string of soft economic releases. Political developments continue to dictate market movements and this may mitigate the impact the spring Budget has on Sterling, with sellers exploiting the anxiety ahead of the Article 50 invocation to send prices lower.

From a technical standpoint, the GBPUSD is heavily bearish on the daily charts as there have been consistently lower lows and lower highs. A breakdown below 1.2150 could encourage a decline towards 1.2000.

ADP NFP in focus

The Greenback has maintained its dominance in the currency markets during trading this week, as speculations heighten over the Federal Reserve raising US interest rates next week. With US economic data repeatedly beating expectations, sentiment towards the Dollar remains firmly bullish. Although some Trump uncertainties continue to linger in the background, the main focus now is the Fed taking action and this continues to support the currency. Investors may direct their attention towards the pending ADP Non-Farm employment report, which could elevate the Greenback higher if the data exceeds estimates. From a technical standpoint, the Dollar Index is bullish on the daily charts. A breakout and daily close back above 102.00 could encourage an incline higher towards 102.50.

Gold descends to five-week low

Gold was exposed to further losses during trading on Wednesday, as expectations intensified over the Federal Reserve raising US interest rates next week. A resurgent Dollar from the improving sentiment towards the US economy has fuelled the selloff, with prices sliding to a fresh five-week low at $1212 as of writing.  The recurrent weakness displayed on Gold suggests that bulls have surrendered from the battle against rate hike expectations, with further downside expected on Friday if NFP exceeds expectations. From a technical standpoint, prices are trading below the daily 20 SMA, while the MACD has crossed to the downside. Previous support around $1220 could transform into a dynamic resistance that encourages a decline towards $1200 and potentially go even lower.

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About Louie Lewis

Louie Lewis
Successful forex trading starts with you first. Then comes the actual strategies and techniques. I have been involved with forex and forex trading for a few years now. It is a wonderful way to build wealth. The learning never stops and I want to help others along their journey into this wonderful market of opportunity.

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