Sterling likely to remain weak

Posted 26 October, 2018

The sterling is plunging vs the US dollar on Friday. For now, the currency has hit the bottom since early-September touching the 1.28-handle. Today, the market sees massive sterling selloffs.

First of all, Theresa May's resignation is no longer so pressing one. Still, the no-deal Brexit issue still persists. In particular, the Irish border problem is yet to see the solution, while the UK economy seems to slow down. As a result, the sterling becomes less attractive with the players staying restless.

Additional pressure comes for the general global market environment. The sterling is the risk asset and naturally depressed by the risk aversion in the market on the trade war and weaker oil.
Moreover, it should be also mentioned strong greenback and difference between the monetary policy of the European Central Bank and US Federal Reserve. As for the UK regulator, the BOE is about to hold a meeting next week – the interest rate revision will face away further if the bank downgrades the GDP and inflation outlook.

At present, the sterling-to-US dollar is coming to 1.27, staying at 1.2795, after the break of the support at 1.2785. The sterling can jump when the players switch to profit taking – this may be a good time for new sales.

Previous forecast

29 October, 2018 14:35

← Oil price upturn requires driver

Oil prices somewhat recovered last Friday. However, oil, in fact, finished the week in the red – the decline had been recorded for the third week in a row. Brent oil keeps trying to hit the 78 handles and move further. For now, the price stands at some $77. 67, after softening during the morning trading. The global stock markets still face selloffs. Specifically, the price upturn in the oil market was restrained last Friday by the US indexes collapse. At the same time, lower Asian benchmarks that can spread to the European markets put pressure on oil on Monday already.

Oil price upturn requires driver

Next forecast

24 October, 2018 16:30

Euro affected from many sides →

With unclear changes during the Tuesday trading, the euro has resumed sliding in the mid-week. For now, the euro-to-US dollar exchange rate fell below 1.397, hitting a 2-month low in Europe, facing a number of factors. The key pressure is still coming from the so-called Italian dead end. The EU has not approved the proposed budget draft, while the Italian government has refused to meet the EU negotiators half way and revise the budget. As a result, the situation will most likely keep escalation and EU stance can get tighter, which definitely plays against the euro. The additional negative driver is strong demand for US dollar, which is gaining grounds almost everywhere today on anticipated PMI report in the USA.

Euro affected from many sides
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