Sterling received a lifeline on Wednesday, after UK services unexpectedly accelerated in September, easing some concerns over the health of the economy.
The Purchasing Managers’ Index for the UK’s services beats market estimates in September, rising to 53.6 from August’s 53.2. While the rebound in services is encouraging and may support expectations for higher UK interest rates, some fears still linger over the cooldown in manufacturing, and contraction in construction. Sentiment towards Sterling remains fragile despite today’s appreciation; with prices destined to dip lower as Brexit-fueled uncertainties continue, this could repel investor attraction towards the currency.
Speaking of uncertainty, the lack of progress in the Brexit talks has left market players anxious. This anxiety can be reflected in Sterling’s overall price action, with the GBP/USD currently trading below 1.3300 as of writing. Taking a look at the currency from a technical perspective, prices are still depressed on the daily charts. Previous support around 1.3300 could transform into a dynamic resistance that results in a further decline towards 1.3150.
Dollar lower ahead of ADP
The Greenback depreciated slightly against a basket of major currencies on Wednesday, ahead of the U.S. ADP private sector jobs data and ISM non-manufacturing PMI for September.
Economists have forecasted that ADP will rise by 131k in the month of September, after an initial print of 237k in August. The negative impact of Hurricanes Irma and Harvey are likely to add some random ingredients into the mix and as such, could result in a weaker jobs print.
Technical traders will continue to closely observe how the Dollar Index behaves, before and after the ADP release this afternoon. A disappointing figure may encourage short-term bears to target 93.00. In an alternative scenario, a daily close above 93.70 should open a path back towards 94.00.
Commodity spotlight – WTI crude
WTI crude was under noticeable selling pressure this week as investors started to question the sustainability of an oil rally, which lasted for a fair chunk of the third quarter.
Market players who were itching for an opportunity to send the commodity lower received permission on Tuesday after U.S. industry estimates on inventories were a mixed bag. U.S. crude oil inventories declined by 4.08 million barrels last week, while the API reported on Tuesday that Gasoline supplies rose by 4.91 million barrels. However, Gasoline supplies rose by 4.91 million barrels and this rekindled some oversupply concerns.
Investors will continue to closely watch for signs on whether OPEC will extend their production cuts beyond the current expiry date of March 2018. While an extension of the deal may support oil prices, this could encourage U.S. shale producers to increase production. As the final trading quarter of 2017 gets underway, Oil markets are likely to be exposed to downside risks, if rising production in the United States obstructs OPEC’s efforts to rebalance the saturated markets.
Focusing on today, the Energy Information Administration (EIA) report will be in the spotlight and could compound oil’s downside, if it follows the same pattern as yesterday’s API report.
From a technical standpoint, WTI crude is under assault by sellers on the daily chart. Sustained weakness below $50 may encourage a further decline towards $49.50 and $48.50, respectively.