Commodities pick up some bids into the London close after durable goods data from the USA rose again
The political football that is the US debt ceiling is causing the markets to sell off whilst the Republicans and Democrats fight it out about how to pay for increases etc. There was also talk of Senator Warren calling Fed Chair Powell’s record into question which will also be causing some concerns for markets who do not like change or uncertainty at the best of times.
Market Wrap
It has been a big risk-off day today as the day was dominated by the testimonies of Fed Chair Powell and US Treasury Secretary Yellen. The consumer confidence data that did arrive just after the US futures open came in worse than expected and the sell-off accelerated. There has also been a lot of movement within the walls of power as the Republicans and Democrats attempt to find a way to raise the debt ceiling, pass the reconciliation and infrastructure bill, without either losing face. The stalemate is causing the benchmark yields to rise and now the US10 year is trading 3% higher to 1.536.
The S&P500 has clearly found the resistance after the retest of the trend line and now looks set to travel towards the daily 200 ema. The move could accelerate if the markets believe the US government is about to go into shutdown.
US Senate Majority Leader Chuck Schumer said that he will ask the Senate for consent to hold a vote to increase the debt limit on a simple majority vote, rather than the 60 votes traditionally required.
Treasury Secretary Janet Yellen warned that failure to raise the debt ceiling could lead to "a financial crisis and a calamity."
The S&P Case-Shiller house price index has risen again to record highs for the 14th consecutive month. There is still a trend of people moving out of city centers into suburban towns as a response to the COVID-19 pandemic.
The forex heatmap shows that the GBP is the weakest of the currencies into the London close even though the fuel shortages at petrol stations are starting to show signs of recovery. The facts are clear that we have a shortage of HGV drivers in the UK to deliver goods and materials around the UK whilst inventories are high, though this is something that can be rectified with a decent government policy but not quickly.
The price of Brent crude came back down from the day’s highs to test the breakout level of $77.55. If this level does hold and we see images of cars cueing for fuel on the daily front pages we could be calling this a support level for the next push higher. A close back inside the previous range is likely on a strengthening US dollar and a decrease in demand but neither looks likely this week.
The ActivTrades sentiment indicator once again proves to be a great contrarian indicator as 82% of traders on the platform are bullish on the pound as the GBPUSD crashes through the recent support level of 1.3600.