Buying sentiment towards the British Pound deteriorated sharply yesterday, after dovish comments from Bank of England’s Governor Mark Carney heavily diluted expectations of an interest rate hike in May.
Carney’s cautious tone and his acknowledgement of recent “mixed” economic data, planted a seed of doubt among investors that the central bank will take action next month. With inflation cooling, retail sales disappointing and a dovish Carney entering the scene, Sterling bulls could be in trouble. The probability of a rate hike in May plunged to below 50% (down from 70% before Carney spoke) and this continues to punish the currency. Sensitivity to monetary policy speculation is likely to remain a key fundamental theme impacting the British Pound. If market expectations continue to deteriorate over higher U.K interest rates, Sterling could be exposed to further downside risks.
Taking a look at the technical picture, this has been a terribly bearish week for the GBPUSD, with prices trading around 1.4060 as of writing. Previous support at 1.4100 could transform into a dynamic resistance that encourages a decline lower towards 1.4000. If bulls are able to push prices back above 1.4100, the next key level of interest will be 1.4230.
Turkish Lira takes a breather
It has certainly been a positive trading week for the Lira, as a surprise announcement of snap elections in Turkey boosted appetite for the currency.
President Tayyip Erdogan called an early election for 24 June, creating a sense of optimism among investors that political stability would increase. The main risk event for the Lira next week will be the Central Bank of the Republic of Turkey’s (CBRT) monetary policy meeting. There is speculation over a potential rate hike in April, following Erdogan’s call for early presidential and parliamentary polls. The Lira could receive further support if the CBRT raises interest rates.
From a technical standpoint, the USDTRY remains under pressure on the daily charts, with prices trading around 4.05 as of writing. A failure of bulls to secure a daily close above 4.05 could result in a decline towards the 4.00 level. Alternatively, a weekly close above 4.05 could inspire bulls to challenge 4.10.
Commodity spotlight – Gold
Gold depreciated on Friday as easing geopolitical tensions and hopes of higher U.S interest rates dented appetite for the yellow metal.
The yellow metal continues to be driven by conflicting fundamental themes and this is reflected in the price action witnessed over recent weeks. While bulls remain inspired by geopolitics, lingering trade war fears and U.S political risk, bears have found support in the form of rising U.S rate hike expectations.
Gold is likely to remain a battleground for bulls and bears until a fresh directional catalyst is brought into the picture. Taking a look at the technical picture, prices could challenge $1360 if bulls are able to keep above $1340. Alternatively, a breakdown below $1340 may result in a decline towards $1324.