Asset Summary – Tuesday, 25 November
GBPUSD faces downward pressure due to a confluence of factors impacting the UK economy. The upcoming budget announcement is creating uncertainty as the Finance Minister grapples with meeting fiscal targets, potentially through tax increases that could stifle economic activity. Weakening economic data, including high borrowing levels, stalled business activity, declining retail sales, and poor consumer sentiment, further weigh on the pound. Compounding this, cooling inflation is fueling expectations of an imminent interest rate cut by the Bank of England, making the pound less attractive to investors seeking higher yields. These conditions suggest a potentially bearish outlook for GBPUSD.
EURUSD is exhibiting downward pressure as the euro weakens against the dollar. This decline is influenced by a combination of factors, including dovish signals from a Federal Reserve official, which suggest possible US interest rate cuts and subsequently strengthen the dollar. Although Eurozone private-sector activity is showing moderate growth and the European Commission forecasts improved Eurozone growth in 2025, these positive developments are overshadowed by the potential for lower US interest rates. Additionally, speculation about a potential Ukraine peace plan involving territorial concessions and military scaling down might be contributing to market uncertainty and further weighing on the euro. These elements collectively suggest a bearish outlook for EURUSD in the short term.
DOW JONES faces a mixed outlook amidst recent economic and corporate news. Weak retail sales figures and job losses suggest potential headwinds for the index, while rising producer inflation could further complicate the economic picture. The increasing probability of a Federal Reserve rate cut might offer some support, but this is balanced by concerns about specific companies’ performances, such as potential negative influence from tech stocks like Nvidia and AMD. Gains in other tech giants like Alphabet and Meta, alongside strong performance from companies like Kohl’s, could offset some of these concerns. The Dow’s direction will likely depend on which of these competing forces proves dominant.
FTSE 100 is exhibiting positive momentum, fueled by anticipation of a forthcoming interest rate reduction by the Federal Reserve. This positive outlook is further reinforced by encouraging performance from banking stocks, which are rising following speculation that upcoming budget announcements will avoid additional taxes on the sector. Kingfisher’s upward revision of its earnings forecast is also contributing to the index’s gains. However, the positive trend is being tempered by underperformance in other areas. For example, Beazley is experiencing a decline attributed to lower-than-anticipated premium growth. Also, while easyJet is still seeing profits, the increase in higher ticket prices may not provide sustainable growth in the long-term. These factors indicate a mixed landscape for the FTSE 100, where overall gains are influenced by a combination of positive and negative company-specific news.
GOLD is exhibiting a bullish trend, driven by mounting anticipation of a Federal Reserve interest rate cut in December. The weaker-than-expected US retail sales and a decline in private sector job growth have fueled speculation that the Fed will ease monetary policy. Comments from key Fed officials suggesting openness to a rate cut have further bolstered this sentiment. As markets increasingly price in a rate reduction, demand for gold as a safe-haven asset and a hedge against inflation is likely to increase, potentially pushing prices even higher. The lack of significant inflationary pressure, as indicated by producer price data, does not appear to be hindering gold’s upward trajectory.