After The UK government unveiled their top tax rate cut, setting fire to GBP Cross pairs, prompting an intensive sell-off on the cable
The UK’s turn of events
After The UK government unveiled their top tax rate cut, setting fire to GBP Cross pairs, prompting an intensive sell-off on the cable. Forcing the Bank of England to intervene by buying 30 year bonds, in order to balance out the bond market. Backlash prompted the new PM Liz truss to withdraw her tax cut plan, sending the pound back to highest level in more than a week above the 1.12 mark targeting the area of 1.14.
In this case, the BOE is no longer set to have an emergency rate hike as speculation in the market murmured.
And speaking of corrections most major assets have rebounded this week, with the U.S. market set for a quick bounce back, as news of hiking rates again in November by 75 basis points fade with other things in focus, giving the U.S. Dollar index a breather, and making room for stocks to uptick.
NFP & OPEC+ on radar this week
Focus will fall on the Non-Farm payrolls this week, where they are expected to drop to 265K from 315K in September. The Friday figures are pretty important as they will indicate whether the Federal Reserve’s aggressive monetary policy has weakened the labor market or it still remains solid.
Especially after Powell’s speech after the September FOMC indicated that they expect to see softer readings from the labor market as a consequence to the aggressive tightening. Although so far, the labor market has been quite intact holding strong and reflecting nothing but a strong U.S. Economy. And I think the USD would agree.
On the radar this week too comes OPEC+ and reports of the organization and its allies to cut production, giving support to oil prices after almost 5 weeks of declines. Oil prices were able to move higher on the news. In addition to being supported by lower crude oil inventories. Geopolitical woes have also been a strong factor to backing this decision of cutting output.
WTI was able to break resistance of $81, climbing to above $82 while Brent opened on an upward gap to trade above levels of $88 per barrel.
Meanwhile in the Eurozone, Russia’s Gazprom halts gas supplies to Italy making the Energy crisis at the front and center in market news this week. Especially after the IEA warns of more issues to be seen in winter.
The Yellow-metal has indeed found support amid the current market uncertainties, moving up towards levels of $1685. As investors try to seek shelter from the current volatility in store. Yet its only natural to see markets witness a correction after the few past weeks of sharp declines.