US Yield Curve Inversion Deepens, GBP Gains on Brexit-related Headlines

Investors Turn Cautious Again as US Yield Curve Inversion Deepens

The dollar continued trading higher against most of the other G10 currencies on Tuesday and during the Asian morning Wednesday. It gained against NZD, CAD, AUD, CHF, EUR and JPY in that order, while it underperformed notably against GBP and slightly versus NOK. The greenback was found virtually unchanged against SEK.

DJIA — Technical Outlook

The Dow Jones Industrial Average cash index traded lower yesterday, but the slide was stopped by the 25720 zone, from where the index rebounded somewhat. Overall, Dow is trading within a sideways range, that’s been containing most of the price action since August 5 th, between 25280 and 26420. Thus, without any clear trending structure on the 4-hour chart, we would adopt a neutral stance with regards to the near-term outlook.

GBP Gains as UK Opposition Parties Agree to Stop a No-deal Brexit

Back to the currencies, the pound was yesterday’s main gainer, coming under strong buying interest after UK opposition parties agreed to work together in an attempt to stop a no-deal Brexit by legislation. The talks were hosted by Labour Leader Jeremy Corbyn, who apparently eased his stance, as his initial plan of a no-confidence vote and a caretaker government appeared to be lacking support. The rally in sterling suggests that investors believe passing a legislation with regards to averting a disorderly exit is a more feasible outcome. That said, it still remains to be seen whether it will gather majority among members of Parliament, who return to Westminster from their summer holiday next week.

GBP/NZD — Technical Outlook

GBP/NZD surged yesterday, breaking above the 1.9335 barrier, which is near the high of August 25 th, but the advance was stopped at around 1.9410, near the high of June 14 th. The pair has been drifting north above a short-term uptrend line since July 30 th, and thus, we would see a positive short-term picture.

As for Today’s Events

The calendar appears to be light today as well, with no top-tier indicators on the schedule. The only release worth mentioning is the EIA (Energy Information Administration) weekly report on crude oil inventories, which is expected to reveal a 2.1mn barrels slide, after a 2.7mn decline the week before. That said, bearing in mind that yesterday, the API report revealed a 11.1mn tumble, we would consider the risks surrounding the EIA forecast as tilted to the downside.

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