• BOE SIGNAL RATE CUTS
• US-SINO PHASE 1
• RISK-ON SENTIMENT AT MARKET OPEN
At the start of this week traders will be watching the news around the UK economy to see if it will add fuel to the dovish tone set by the Bank of England Governor and two of his MPC colleagues. Sterling is near two-week lows as policymakers signal towards a rate cut should there be no optimistic news from the coming U.K. data. Mark Carney who is to be replaced this year by Andrew Bailey, said that “there is insufficient conventional policy space based on past experience” and that there could be a “relatively prompt response” from the bank if the current spell of economic weakness persisted. Brexit and the global slowdown are the main drags on the U.K. economy, with uncertainty remaining around not extending the transition period past December 2020.
Asian currencies have rallied since the open with the imminent signing of the U.S.-Sino trade deal being cited as the reason. The phase one agreement is due to be signed at the White House on Wednesday. Last week we identified 97.43 and 97.55 on the US dollar index as potential levels for a bullish USD to reach. The DXY still needs to break above the December swing highs before further bullish price action can be expected. At the market open, retail traders are positioned with a bearish sentiment towards the USD.
As central banks around the globe look to add to their balance sheets and keep an accommodative monetary policy, U.S. equities continue to make all-time highs. With tensions between the U.S. and Iran, deescalating currency traders have looked to move out of safe-haven assets. US bond yields could rise and Gold looks likely to trade back into its range below $1550.00