UK Returns to Trading: Investors Eye BoE Press Conference

Volatility decreased during Monday’s trading session due to no economic events and a UK bank holiday. The US Dollar remained steady throughout the day, winning small gains against certain currencies. Yesterday was one of the rear days when investors saw bullish price movement in the US Dollar, Gold, and the US stock market. The only US equity index that could not climb higher was the Dow Jones. The NASDAQ increased by up to 0.40% before retracing and ending the day on a 0.25% gain. 

One of the best-performing currencies of this month so far has been the British Pound. However, the latest surveys show that the UK will suffer the most from the “developed economies” category. Today will be the first day the UK investors return to the trading floor after a 3-day weekend. Investors will also closely monitor the Bank of England’s press conference on Thursday, where he will likely comment on the economic outlook. In addition, investors will have their eyes fixed on the UK monthly GDP figure on Friday morning. 

GBP/USD -  UK Investors Return to Trading

The British Pound against the US Dollar has increased in value for three consecutive weeks, and has generally performed well against other major currencies. The Pound is also gaining against the Euro and the Swiss Franc. Conversely, the Dollar usually depreciates against most currencies as investors believe the Federal Reserve will not further increase the Federal Fund Rate. 

Even though the latest NFP figure was much higher than markets were expecting, and inflation may also be higher, the Fed will unlikely consider a much higher rate. Last night, the Federal Reserve advised the committee can see signs of stress within the banking sector as growing credit risks and funding concerns can be seen. The Fed also confirmed the demand for business loans is weakening. Therefore, the regulator will likely stick to the current rate, which is already pressuring the banking sector and inflation. Chicago’s Federal Reserve President, Mr. Goolsbee, said it is too early to discuss a further increase in the rate, despite the significant increase in jobs in the last month. Investors will monitor if the committee’s tone changes after tomorrow’s inflation data. 

Markets expect the Bank of England to increase interest rates from 4.25% to 4.5%. Some economists have advised the Bank of England may even consider raising interest rates to 5% as inflation remains significantly higher than in other economies. However, this will likely apply significant pressure on the UK economy and may even trigger a recession instantly. 

GBP/USD 1-Hour Chart on May 9th 

This morning's price movement is mainly in favour of the British Pound. However, the price is also forming a head and shoulder pattern. The head and shoulder pattern indicates some price movement in turn of the Dollar, and the asset has also created a lower high. This can be a signal for a potential downward price movement. However, there are no other significant indications yet, but these may develop if the price declines to a lower low. 

NASDAQ 

The NASDAQ again increased to a higher high during yesterday’s US trading session. However, the price could not maintain the bullish price movement and has since slightly declined. Even though the price movement had increased, the asset still shows signs of pressure as the NASDAQ hovers around previous highs. Nonetheless, the support continues to trade within the bullish zone of the regression channel and above most moving averages. Both are possible indications of upward price movement.

NASDAQ 30-Minute Chart on May 9th 

The primary earnings for the NASDAQ have already been released. Investors will mainly be waiting for reports from Cisco Systems on May 17th. Cisco Systems is also the 12th most influential company within the NASDAQ.  Another major announcement will be released on May 24th, when NVIDIA releases quarterly reports. NVIDIA is the 4th most effective company for the NASDAQ’s overall price. Markets expect NVIDIA’s earnings per share to rise for a fourth consecutive quarter. 

Summary:

• Yesterday was one of the rear days when investors saw bullish price movement in the US Dollar, Gold, and the US stock market.
• The NASDAQ increased in value, but could not maintain its price gains. The instrument struggles at the previous price highs. 
• Investors this month will be waiting for the release of Cisco’s and NVIDIA’s quarterly earnings reports. 
• The GBP/USD forms a “head and shoulders” pattern while investors focus on tomorrow’s inflation data and Thursday’s BoE rate decision.