Global equity markets were under pressure on Wednesday as rising U.S. Treasury bond yields and speculation of higher U.S. interest rates dented appetite for stocks.
Most Asian shares fell during early trade, following a heavy sell-off on Wall Street overnight. The negative momentum from Asian markets and growing caution have already punished European stocks this morning. With investors likely to maintain some distance from equities as U.S. bond yields climb, the markets could extend losses this afternoon.
Sterling depressed below 1.4000
Sterling struggled to push back above the 1.4000 pivotal level this morning as investors continued to question the likelihood of a Bank of England interest rate hike in May.
An aggressively appreciating dollar has punished the British pound/U.S. dollar (GBP/USD) currency pair further, with prices trading around 1.3957 as of writing. Slowing UK inflation and a cautious Mark Carney have forced investors to scale back expectations of a May rate hike. The Pound, which remains extremely sensitive to monetary policy speculation, could depreciate further based on these factors.
Taking a look at the technical picture, the GBP/USD is bearish on the daily charts. The decisive breakdown below the pivotal 1.4000 support level could encourage a decline toward 1.3920 and 1.3800, respectively. For bulls to jump back into the game, prices need to secure a daily close back above 1.4000.
Currency spotlight: USD/JPY
The Japanese yen slipped to a fresh two-month low at 109.25 during Wednesday’s trading session, as higher U.S. yields boosted the Dollar.
With the dollar finding amble support from rising bond yields and expectations of higher U.S. interest rates, the U.S. dollar/Japanese yen (USD/JPY) currency pair has scope to venture higher. From a technical standpoint, the USD/JPY is bullish on the daily timeframe as there have been consistently higher highs and higher lows. A daily close above 109.00 could encourage an incline higher towards 109.70. Alternatively, if bulls fail to maintain control above 109.00, the next levels of interest will be at 108.40 and 107.80, respectively.
Commodity spotlight: Gold
Gold has edged lower with prices sinking towards $1,324 per oz., despite global equity markets suffering heavy losses.
An aggressively appreciating dollar, expectations of higher U.S. interest rates and easing geopolitical tensions are the most likely culprits for the yellow metal’s depreciation. With the dollar expected to remain supported by rising bond yields and Fed hike speculation, zero-yielding gold could feel the heat. If U.S. GDP data release dishes out an upside surprise on Friday, bears may be injected with enough inspiration to send prices toward $1,300. All in all, it must be kept in mind that gold still remains in a wide $60 range with support at $1,300 and resistance at $1360. Prices are likely to remain confined within these regions until a fresh catalyst is brought into the picture.