Asset Summary – Monday, 17 November
GBPUSD is under pressure as the market reacts to uncertainty surrounding the UK’s upcoming budget and fiscal policy. While improved economic forecasts have reduced the immediate fiscal shortfall, the government’s potential reliance on less direct tax measures, like threshold adjustments, is causing concern. This, coupled with ongoing debate within the cabinet and rising gilt yields, contributes to a cautious outlook for the pound. Although the market anticipates a possible interest rate cut by the Bank of England, the overall fiscal situation is weighing negatively on the currency’s value against the dollar.
EURUSD appears to be in a holding pattern around the $1.16 level. The euro’s direction could be influenced by upcoming ECB communications regarding inflation and potential risks like tariffs and market volatility. While the European Commission’s revised growth forecast for the Eurozone, spurred by increased exports to the US, is a positive factor, the projected slowdown in growth beyond 2025 might temper bullish sentiment. Delayed US economic data creates uncertainty around Federal Reserve policy, further contributing to the current stability.
DOW JONES’s outlook is neutral as indicated by flat futures trading. Investors are cautiously awaiting economic data releases and earnings reports from major companies to provide further direction. While positive sentiment is present in the S&P 500 and Nasdaq 100 futures, concerns persist regarding stretched valuations in the AI sector and the Federal Reserve’s potential interest rate decisions. The decreasing probability of a near-term rate cut by the Fed may weigh on market sentiment, offsetting any potential gains from strong earnings or economic data. The performance of companies such as Nvidia, Home Depot, Target, and Walmart this week will likely influence investor sentiment and trading activity.
FTSE 100 experienced a largely uneventful trading day, stabilizing after previous declines. While the index remained relatively unchanged overall, certain sectors and individual stocks displayed notable movement. Gains in companies like WPP, buoyed by potential acquisition interest, alongside positive performance from 3i, SSE, and British American Tobacco, were countered by losses in Burberry and the mining sector, indicating a mixed market sentiment and sector-specific pressures influencing individual stock valuations within the index. The impact of fiscal policy adjustments from the previous week appeared to lessen, allowing for a more balanced trading environment.
GOLD’s near-term direction is highly dependent on upcoming US economic data releases, particularly the non-farm payrolls report and the Federal Reserve’s meeting minutes. The market is closely watching these indicators for signals about the Fed’s future interest rate decisions. The prospect of continued high interest rates is weighing on gold, as it reduces the metal’s appeal as a non-yielding asset. However, strong underlying support remains, driven by central bank purchases and investor demand for safe-haven assets amid fiscal uncertainties and geopolitical instability. These factors suggest that while short-term volatility is expected, gold’s overall positive trend this year could continue.