Two more major Tier 1 data events have passed and today the Bank of England was disappointing and OPEC+ came in as expected. 7-2 was the majority vote for keeping interest rates at record lows, and 6-3 was the majority vote to keep the Bank of England's bond-buying program unchanged. Concerns about rising prices were weighed against downside risks from slowing global growth and a potential increase in unemployment because of the end of furlough schemes.
Market Wrap
Was it a disappointing Bank of England, a more Hawkish Fed, or a mix of the two that caused the GBPUSD to tumble today? A mix of the two for sure. The traders on the ActivTrader platform have shifted towards being more bullish with 60% of them long as GBPUSD trades below the important 1.3500 big figure. There is a demand zone between 1.3420 and 1.3480, so if any bulls remain, this is where they could step in.
There was a time when Mark Carney was the Governor of the Bank of England, and he quickly became the ‘unreliable boyfriend’. Now BoE Governor Bailey is being tarnished with a similar brush as the media pounced on him questioning whether the guidance had been misleading with regards to the expected rate hike. He was still pushing the narrative that there are several meetings within the coming months where rate hikes will be on the agenda, though the MPC has pivoted to the jobs market and is less concerned with the rising inflation. Though if incoming data comes in line with the bank's central projections it will be necessary to increase the Bank Rate over the coming months in order to return CPI to target in a sustainable manner.
The weekly US Initial Jobless Claims came in under expectations and below the previous week's revised numbers. This is great news, especially when combined with yesterday's ADP nonfarm numbers. Fed Chair Powell said the sweet spot for monthly NFP is 550K-600K per month if the lift-off for the rate hike cycle is to begin early in H2 2022.
The US continues to export dollars around the world as seen in the international trade figures today. The deficit is growing and is now at $-80.9 billion, up from $-72 million.
OPEC+ decided to keep to the planned 400k barrels per day, with the United Arab Emirates predicting an oil surplus in the first quarter of next year. The Saudi energy minister also said that they had been discussing with the US at all levels and that they believe gradual oil output increases is the right thing to do. The next meeting for OPEC+ will take place on December 2nd. The US may still have to release some Strategic Petroleum Reserve (SPR) or stop exports altogether and will consider a full range of tools.
The OPEC+ meeting and widely expected 400K BPD increase did little to confirm a directional move in Brent today. We’re now waiting to see if the lower time frame H&S pattern works out for the bears or if the bull flag breakout to the upside wins out.
The rising US dollar will put pressure on the commodity pairs and commodities alike and we could be testing the $94.50 resistance level by NFP tomorrow. The data coming out of the US is supporting the greenback and a tighter monetary policy is also helping the dollar at these levels. The Nasdaq and S&P500 are both green for the day at the time of writing, with the tech index adding another 1.11% from the open.
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