Asset Summary – Thursday, 27 March
GBPUSD faced downward pressure as a confluence of factors weighed on the British pound. Disappointing inflation data for February, coupled with revisions in the UK’s economic forecasts, contributed to the decline. Specifically, the upward revision of the 2025 inflation forecast to 3.2% and the lowered growth forecast to 1% signaled potential challenges for the UK economy. Additionally, the anticipated increase in borrowing for 2025-26, despite overall efforts to reduce public sector net borrowing, created uncertainty. While the government’s fiscal policies aimed at restoring the budget offered some reassurance, the immediate impact of these revisions led to a weakening of the pound against the dollar.
EURUSD faces downward pressure as recent economic data and commentary from European Central Bank (ECB) officials suggest a likely easing of monetary policy. While Eurozone private sector activity is expanding, it’s not meeting expectations, particularly with a slowdown in the dominant services sector. Furthermore, multiple ECB officials, including Cipollone, Stournaras, Lagarde, and de Galhau, have hinted at or explicitly supported the possibility of a rate cut, potentially as early as April. This dovish stance by the ECB, coupled with concerns about weaker economic growth, signals a weakening Euro relative to the US Dollar, as the prospect of lower interest rates typically diminishes a currency’s attractiveness to investors.
DOW JONES faces potential downward pressure as market sentiment weakens following the announcement of new tariffs on foreign-made cars. The prospect of reciprocal tariffs and potential retaliation creates uncertainty, which could lead to increased market volatility and concerns about the broader economic impact. Declines in major automotive stocks, such as General Motors and Ford, will likely negatively influence the Dow’s performance. The overall market downturn, as reflected in the S&P 500’s and Nasdaq’s declines, along with losses in prominent tech companies, further suggests a challenging trading environment for the Dow.
FTSE 100 experienced a positive session, closing at 8,690, primarily fueled by a weaker pound that benefited companies with significant overseas revenues. The reduction in UK inflation to 2.8% contributed to this effect. However, the Spring Statement from the Chancellor offered limited encouragement to investors. The revised, lower UK growth forecast from the OBR, now at 1% for 2024, cast a shadow over the market, particularly impacting the housing sector. While defense stocks received a boost from increased spending pledges and Shell benefited from its strategic update, the overall impact of the statement was muted, leaving investors wanting more substantial growth-oriented policies.
GOLD is exhibiting upward price momentum as investors seek refuge from potential economic instability. The looming threat of tariffs on imported automobiles, initiated by the US, is generating anxiety about retaliatory actions and their impact on global trade and economic growth. This uncertainty is bolstering demand for gold as a safe store of value. The Federal Reserve’s cautious approach to interest rate cuts, despite some progress on inflation, further supports gold’s appeal, as lower interest rates typically make non-yielding assets like gold more attractive. Traders are keenly focused on the upcoming PCE report, anticipating that the data will offer additional clues about the future direction of monetary policy and, consequently, gold’s price trajectory.