Brexit-fuelled anxieties have exposed Sterling to sharp losses this week with sellers exploiting the rising uncertainty to attack the British pound/U.S. dollar (GBP/USD) currency pair to a fresh six-week low at 1.2260 during trading on Thursday. Sentiment is turning increasingly bearish towards the Pound and the terrible combination of soft domestic economic data from the UK coupled with political risk could ensure the currency remains pressured.
Although UK Prime Minister Theresa May has stated that Article 50 will be invoked in roughly two weeks, the government’s recent defeat in Lords could add another layer of uncertainty to the ongoing Brexit developments. With the lingering fears over a possible independence referendum from Scotland after Article 50 is invoked adding to the anxiety, it has become quite clear that uncertainty remains a certainty when dealing with Sterling.
From a technical standpoint, the GBP/USD has found itself under renewed selling pressure on the daily charts. The decisive breakdown and daily close below 1.2300 could encourage a lower selloff toward 1.2200.
Dollar bulls are back in town
The growing chorus of hawkish Fed officials raising their thumbs up for an imminent interest rate hike has sent the Greenback to a fresh seven-week high at 102.00 during Thursday’s trading session. With U.S. data displaying signs of economic stability and an improving global economy boosting overall sentiment, expectations of a March U.S. interest rate increase have skyrocketed with the CME FedWatch tool displaying a 66% probability. Although markets are now expecting the Fed to raise U.S. rates this month, the Trump uncertainty lurking in the background could still sabotage the central bank’s efforts to take action. As of now, the dollar bulls are back in full force and a breakout above 102.00 on the Dollar Index could encourage a further incline higher toward 102.50.
Currency spotligh: EUR/USD
The prospects of higher U.S. rates this year coupled with uncertainty in Europe have made the euro/U.S. dollar (EUR/USD) currency pair fundamentally bearish. Euro weakness should remain a recurrent theme this quarter as jitters from the political risks in Europe haunt investor attraction towards the currency. From a technical standpoint, the pair is heavily bearish on the daily charts as there have been consistently lower lows and lower highs. A breakdown below 1.0500 could encourage a lower selloff toward the next relevant support at 1.0350.
Commodity spotlight: Gold
Gold may be destined to display explosive levels of volatility this month, as uncertainty coupled with the prospects of higher U.S. rates prompts investors to offload and reload positions in an effort to be on the winning side. Although political risks in Europe, Brexit woes, and Trump developments may support the metal in the medium term, a resurgent Dollar from revived rate hike expectations has exposed the metal to downside risks this week. From a technical standpoint, weakness below $1,235 per ounce could spark a further selloff back towards the $1,220 higher low.