Consumer
price inflation eased to a 7-month low at 2.7% in February, down from 3% in
January, as the impact of Sterling’s Brexit-fuelled selloff faded. Today’s
weaker than expected inflation figures are unlikely to budge market
expectations of the Bank of England raising UK interest rates in May.
However,
if wage growth figures published on Wednesday print in line with forecasts at
2.6%, this could ease some pressure on the BoE to take further action beyond
May. With the British Pound still noticeably sensitive to monetary policy
speculation, bears exploited the fall in inflation to drag the GBPUSD towards
1.4020.
From a
technical perspective, the GBPUSD still remains at risk of sinking lower if
bulls are unable to maintain control above the 1.4000 level. A breakdown and
daily close below 1.4000 could invite a decline towards 1.3930 and 1.3850,
respectively.
Dollar steady
ahead of FOMC meeting
The
Dollar was steady against a basket of major currencies ahead of the heavily
anticipated Federal Reserve policy meeting under the new Fed Chairman, Jerome
Powell.
With
the central bank widely expected to raise interest rates in March, much focus
will be directed towards the “dot plots” and Powell’s first press conference.
Investors are likely to closely scrutinize the policy statement and conference
for clues on whether the Fed will raise interest rates 3 or 4 times this year.
King Dollar could be exposed to downside risks if Powell comes across less
hawkish than market expectations. Although speculation of higher rates has the
ability to support the Greenback, political uncertainty in Washington remains
an invitation for bears to attack.
Focusing
on the technical picture, the Dollar Index is at risk of trading lower if
prices are unable to keep above the 90.00 level. Repeated weakness below 90.00
could encourage a decline towards 89.50. If bulls are able to maintain control
above 90.00, then the Dollar Index has scope to challenge 90.30 and 90.50, respectively.
Global stocks
gripped by caution
Global
equity markets were a sea of red on Monday, as the unsavoury combination of US
interest rate jitters and lingering trade war fears eroded risk appetite.
In
Asia, stocks stumbled in Tuesday’s trading session following an overnight
decline on Wall Street. Although European markets opened on a firmer note,
investors still remained guarded ahead of the Fed meeting. With Wall Street
suffering painful losses on Monday thanks to a Facebook-led tech selloff, U.S
stocks remain vulnerable to further downside amid the growing caution this
afternoon.
Political
uncertainty in Washington coupled with heightened fears over global trade
tensions has clearly left market sentiment fragile. Stock markets are likely to
remain exposed to downside shocks, as uncertainty encourages investors to
scatter away from riskier assets to safe-haven investments.
Commodity
spotlight – WTI Oil
Oil
prices have appreciated as continued tensions in the Middle East stimulated
concerns over potential supply disruptions.
While
news of the United States potentially re-imposing sanctions on Iran could fuel
the current upside, growing fears of rising U.S production are likely to create
headwinds for bulls down the road. With the oversupply concerns still a major
theme impacting oil prices, WTI Crude remains vulnerable to heavy losses.
Focusing
purely on the technical picture, WTI experienced a technical breakout above the
$62.00 level which could encourage a further incline higher towards $63.30 and
$64.00, respectively.
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