Asset Summary – Friday, 31 October
GBPUSD is facing downward pressure as several factors weigh on the British pound. The strengthening US dollar, fueled by the Federal Reserve’s recent interest rate decision and cautious outlook, is a primary driver. Domestically, increasing speculation about potential Bank of England rate cuts and concerns surrounding the upcoming budget, including potential tax increases and a likely downgrade to the UK’s productivity growth forecast, are further contributing to the pound’s weakness. Additionally, softer inflation data reinforces expectations of monetary easing, adding to the negative sentiment surrounding the currency. These combined elements suggest a continued bearish outlook for the GBPUSD pair.
EURUSD finds itself in a complex situation reflecting divergent economic forces. Eurozone inflation cooling towards the ECB’s target limits the pressure on the central bank to hike rates, potentially restraining euro appreciation. While the Eurozone experienced modest GDP growth, driven primarily by Spain and France, the sluggish performance of Germany and Italy could weigh on investor sentiment toward the euro. Meanwhile, the Federal Reserve’s recent rate cut, coupled with cautious signals regarding future easing, creates uncertainty around the dollar’s direction. The combination of these factors suggests a potentially range-bound EURUSD, with the euro’s strength capped by ECB policy and uneven Eurozone growth, and the dollar’s direction influenced by evolving US economic data and Federal Reserve decisions.
DOW JONES faces a mixed outlook. While positive after-hours movement in S&P 500 and Nasdaq 100 futures suggests potential upside, driven by strong earnings reports from tech giants like Amazon and Apple, and Netflix’s stock split announcement, the index experienced downward pressure in the previous trading session. A decline on Thursday, influenced by concerns over increasing AI infrastructure costs and a lack of market-moving outcomes from a meeting between Presidents Trump and Xi, presents a counterweight to any positive momentum. The performance of tech stocks within the Dow Jones index will likely be a key factor in determining its direction.
FTSE 100 experienced a slight downturn, retreating from recent highs as investor risk appetite diminished. The decline was influenced by underperforming banking and mining sectors, along with disappointing results from WPP and concerns regarding the Chinese economy impacting Burberry, Standard Chartered, and HSBC. Fresnillo’s strategic acquisition aimed at diversification provided some positive momentum. The valuation of Princes Group’s IPO suggests a cautious market reception. Looking ahead, the Bank of England’s upcoming meeting and potential adjustments to interest rate expectations could further influence the index’s direction, especially considering the backdrop of slowing growth and easing inflation.
GOLD is facing downward pressure in the short term as diminished expectations of Federal Reserve rate cuts and a tentative US-China trade agreement curb investor enthusiasm. The strengthening dollar, influenced by cautious remarks from the Fed Chair, makes gold more expensive for international buyers, further weighing on prices. However, the long-term outlook remains positive, supported by robust central bank demand as indicated by substantial purchases in Q3, positioning the metal for a monthly gain and a strong overall performance this year. Uncertainty surrounding the trade deal’s sustainability could also provide future support.