Equities Had Another Good Run, BoE Keeps Interest Rate The Same

Equities Push Higher Again

Yesterday, most of equity markets were swimming in the green. Although the Asian market was seen closing slightly on the mixed side, Europe picked up the pace and led the way, followed by the US. Also, gold established another record high, hitting the 2055 level. As we mentioned in our yesterday’s report, the yellow metal continues to rise together with equities, which is slightly concerning, as this makes the precious metal less of a safe-haven. Instead, that title seems to get passed on to USD instead. Given that gold had already a decent rally, there is a possibility to see a bit of correction, lower, however, we have to wait for a reversal signal first, before starting to examine such an option. If USD starts attracting buying interest, that may send gold for a slight correction lower.

BoE Stays With The Same Rate

This morning we have received the Bank of England’s decision on its interest rate. The Monetary Policy Committee voted unanimously and kept the rate at the previous level of +0.1%. One of the reasons is that in June, the BoE announced an additional £100bn asset purchase program to support the economy, which had some positive effects. The relaxed lockdown measures helped bring the economy back to life a bit, but huge headwinds still remain. As of May, the unemployment rate remains at a steady 3.9%. Consumer spending did pick up as well, as many people are eager to get back to their normal lives. This may also put the Committee off from bringing the interest rate further down in the future, especially if those readings continue to satisfy the Bank.

GBP/JPY — Technical Outlook

Overall, GBP/JPY continues to balance above its short-term upside support line taken from the low of June 30 th. But from the beginning of this week, the pair seems to be coiling up, potentially forming a symmetrical triangle. Until we get a clear breakout through one of the side of the triangle, we will remain neutral.

Euro Stoxx 50 — Technical Outlook

Looking at the technical picture of Euro Stoxx 50 on our 4-hour chart, we can see that the index tried to move higher in the first half of this week, but so far is finding good resistance near the 3293 barrier, from which it corrected a bit lower. The price, however, remains above the 200 EMA, and above the short-term tentative downside resistance line, taken from the high of July 21 st. Some might see all this as a positive for the near-term outlook. For now, we will take a somewhat bullish approach, because we would prefer to see a break above that 3293 barrier first, before getting a bit more comfortable with higher areas.

As for the rest of today’s events

As every week, from the US we will get the initial jobless claims, together with the continuing jobless claims. The current forecast for the initial jobless claims sits at around 1450k, which is very close to the previous reading of 1434k. Lately, the number has stabilised just slightly below 1500k, which some might see as a positive. However, the number is still on the high side, comparing to where it was before mid-March.



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