Euro has reached its highest levels and gold is regaining its strength beyond the 1255 threshold again
The British Public Sector Net Borrowing for June was released Friday rising to £6.9 billion, almost 50% higher than June of last year.
The deficit was mainly due to higher inflation which forced the government to spend more on financing its debt; other factors included lower GDP growth, a fall in corporation tax receipts and a bigger than expected contribution to the EU budget in June. The government’s deficit is already expected to rise from full-year borrowing of £46 billion last year to £58 billion this year.
The higher than expected borrowing bill will push down on the UK economy in the coming months and could limit the scope for an easing in the planned fiscal squeeze. Furthermore, Jack Di-Lizia, a Deutsche Bank strategist, mentioned that uncertainty over Brexit “should keep uncertainty elevated and restrain the BOE’s ability to tighten in August and the remaining meetings for 2017”.
Following Thursday's ECB press conference, subdued trade has been evident during the European session.
Moreover, it’s worth mentioning that the International Monetary Fund agreed to a new conditional bailout for Greece, ending two years of speculation on whether it would join in another rescue and giving the seal of approval demanded by many of the country’s euro-area creditors.
In currencies, RBA Deputy Governor Debelle stated no automatic reason to conform to recent hikes abroad. New Zealand Finance Minister Joyce stated NZ firms are coping well with NZD at current levels, added NZD reflects strong NZ economy. FX markets have slowed this morning, as FX traders seem non-excitant following yesterday’s volatility. The price action largely came overnight from the antipodeans. Comments from New Zealand’s Finance Minister Joyce stated that NZ firms are coping well with NZD at current levels further adding that a strong NZD reflects strong NZ economy and he is unperturbed by NZD strength. NZD/AUD broke through 0.94 as bulls arrived, consolidating just below at 0.9390, a firm break of this level could see a test of 0.9480. Further, Aussie weakness aided the NZD/AUD push, as RBA Deputy Governor Debelle stated that there is no automatic reason to conform to recent hikes abroad.
In commodities, precious metals have continued their bullish grind, spurred by the Trump reports on Thursday. Gold looks toward 1260.00, as July’s recovery continues. Oil continues to struggle to find any real direction; however, WTI’s July 43.65 upward trend line continues to provide support, WTI bulls would need to see a firm break of 48.50 to indicate a change in momentum.
The Bloomberg Dollar Spot Index headed for its second straight weekly decline as a probe into possible ties between Donald Trump’s campaign and Russia was said to extend to the President’s business dealings. Treasuries rose a second day, following gains in European government bonds.
EUR/USD – The euro rally following the ECB decision seems to be coming to an end. Based on the current momentum, the nearest support that the currency might reach is the 1.1616 level.
GBP/USD – Even though the negative public sector net borrowing figure was able to buoy the currency for a bit, however, the currency found enough support and continued going higher. Resistance is seen around the 1.3020 area.
USD/JPY – The USD/JPY continued to weaken and fell below the 55-EMA and the 25-EMA levels. Currently, the pair seems to be finding enough support at the 111.4 level.
AUD/USD – Upside momentum still intact with the pair stalling just under the 0.8000 psychological zone. Corrections are possible towards the mid-0.7800s but upside like to return after enough time lapses.
GOLD – Demand for safe haven continues to drive Gold higher. Next resistance around the 1255-60 area and like to pause the short term uptrend for a short while.
S&P500 – Uptrend very strong with the index pushing new highs. Break above 2480 could mean a test of 2500 very soon and further gains as US stocks remain fueled by waves of buying.
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***Information contained in this news letter are gathered from third parties and should not be regarded in any way as trade advice or recommendations by CM Trading. CM Trading does not recommend or advise traders or investors in their decision making, but merely provides information from the market for its clients as additional information being made available as per the events occurring in the financial markets.
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