Asset Summary – Wednesday, 29 October
GBPUSD is facing downward pressure as economic headwinds gather in the UK. A likely downgrade to the UK’s productivity growth forecast raises concerns about fiscal stability and adds pressure on the government to address a significant budget shortfall. This, coupled with softer inflation data reinforcing expectations of monetary easing by the Bank of England, is weighing on the pound. Increased market expectations for a rate cut further diminish the appeal of the GBP relative to the USD, suggesting potential for continued weakness in the GBPUSD pair.
EURUSD is likely to experience volatility due to several key events. Positive developments in US-China trade negotiations could bolster risk sentiment, potentially weakening the US dollar and supporting the euro. The ECB’s expected hold on interest rates might offer limited support to the euro, while a US Federal Reserve rate cut could pressure the dollar further. Euro Area GDP and inflation data will be crucial; stronger-than-expected figures could strengthen the euro, while weak data could weaken it against the dollar. The interplay of these factors suggests potential for both upward and downward movement in the EURUSD pair.
DOW JONES appears poised for continued gains, as indicated by futures contracts rising nearly 100 points. This positive momentum builds upon three consecutive sessions of record highs for major indexes, suggesting sustained investor optimism. Contributing to this outlook are strong earnings reports, such as Caterpillar’s impressive Q3 sales driving a 4.7% jump, and positive developments for tech companies, with Microsoft, Meta, and Alphabet all showing pre-market gains ahead of their earnings releases. Furthermore, anticipated interest rate cuts by the Federal Reserve could provide additional tailwinds for the index. While some companies like CVS experienced declines despite positive results, the overall sentiment suggests a favorable trading environment for the Dow Jones.
FTSE 100 experienced positive momentum, reaching new record highs, fueled by strong performance in the mining sector and encouraging financial reports from key companies. Positive revisions to earnings forecasts from major players like GSK and Next boosted investor confidence. Further supporting the index was optimism surrounding potential improvements in US-China trade relations, which particularly benefited copper miners. Reassurances regarding production targets and trading performance from Glencore added to the upward pressure on the index.
GOLD is experiencing upward pressure, primarily fueled by investors buying at lower prices after a period of decline. Expectations of a Federal Reserve interest rate cut are also contributing to this rise, with the market anticipating further reductions in the near future. However, the potential for a US-China trade agreement introduces uncertainty, as a resolution could decrease demand for gold as a safe-haven asset. Despite this, gold’s overall performance remains positive, showing substantial gains throughout the year, driven by various global economic anxieties, central bank purchasing activity, and worries about currency devaluation.