Asset Summary – Friday, 14 November
GBPUSD is facing downward pressure as investors react to concerns surrounding the UK’s fiscal policy. The potential abandonment of income tax increases, despite a reduced fiscal shortfall, raises questions about the government’s long-term financial strategy. While the market has slightly reduced expectations for imminent Bank of England rate cuts, increasing gilt yields are adding to the economic uncertainty and impacting the pound’s value. Traders are likely factoring in the upcoming budget announcement and any potential shifts in fiscal policy, which are expected to continue influencing the currency pair.
EURUSD is showing a bullish trend as the euro strengthens against the dollar. The reopening of the US government is boosting risk appetite, which typically favors the euro. While investors await clarity on monetary policy from both the ECB and the Fed, current sentiment suggests the ECB is likely to hold rates steady, potentially making the euro more attractive. Meanwhile, the possibility of a Fed rate cut in December is diminishing, adding further pressure on the dollar. This combination of factors supports the euro’s rise and suggests potential for continued upward movement in the EURUSD pair.
DOW JONES is positioned to open lower, as indicated by futures contracts losing approximately 180 points. This anticipated decline follows a significant market downturn on Thursday. However, despite the negative pressure from tech sector concerns and uncertainty surrounding future Federal Reserve rate cuts, the Dow Jones has still managed to gain roughly 1% for the week. This suggests relative resilience compared to the Nasdaq, which is down for the week, but the potential for continued volatility remains given the prevailing market anxieties.
FTSE 100 experienced a significant decline, underperforming compared to other European markets. This downturn was triggered by a combination of factors including rising UK gilt yields, a weakening pound, and speculation about potential changes to income tax policies. These factors have collectively heightened concerns regarding the UK’s fiscal stability, leading to a reassessment of expectations for future interest rate cuts by the Bank of England. Specific sectors such as banking and homebuilding faced substantial losses, while only energy companies benefited from rising oil prices. While the index has previously demonstrated resilience, the renewed fiscal uncertainty is exerting downward pressure on its overall performance.
GOLD’s price movements are currently volatile, influenced by delayed US economic data releases following a government shutdown. Initial gains were offset by concerns that crucial economic reports, such as inflation and employment figures, might be incomplete, leading to reduced expectations for Federal Reserve interest rate cuts. This uncertainty is weighing on prices. However, underlying support remains due to continued central bank buying activity and consistent demand from investors seeking a safe haven against potential fiscal instability, preventing a steeper decline and suggesting a degree of resilience.