Financial Markets Insight: Focus Shifts to the Upcoming UK Budget

The latest news from this morning is that the Republicans have won the US elections by a slim majority. Though, the price movement of the US Dollar sees little direction and continues to trade within the current price range. 

US Dollar and Stocks

The currency continues to be under pressure from members of the Federal Open Market Committee, advising they would consider lowering the pace of rate hikes. However, all members have confirmed that a pause is not an option. The likelihood of a 50 basis point hike in December continues to be a possibility, but market participants should be aware that November’s CPI figure can turn the cards. 

However, the US Dollar was also supported by the latest sales figures, which continue to indicate that the economy is experiencing strong consumer demand and confidence. The US Retail Sales and Core Sales figures both read 1.3% which is the highest since February. 

The Retail Sales figure is also known to support the US Stock Market as well as the US Dollar. However, neither received significant support nor saw an increase in orders. Economists have advised that the price has significantly increased in a short period, which may have resulted in traders taking a “wait and see” stance before further positioning themselves within the market.

GBP and the UK Economy

Investors have also been specifically concentrated on the GBP, FTSE100 and over UK economy. The new UK Chancellor is due to announce the new UK Budget, which will be announced throughout the day. The UK Government and especially the conversation market is looking to put “Trussonomics” in the past, but traders are interested to see how investors react this time. 

Also, investors are digesting the latest inflation figures, which have increased to more than a 4-decade high. The latest inflation reading 11.1% which puts further pressure on the Bank of England to maintain the pace of rate hikes. During yesterday’s speech a senior member of the BoE advised markets that the UK economy is under pressure not only from the energy crisis and inflation but also from Brexit which is taking its toll. 

Currently, the GBP is seeing its strongest price movement against the US Dollar and Japanese Yen. The Japanese Yen came under further pressure from the Bank of Japan, which this week defended their ultra-dovish monetary policy regardless of the adverse effect on the currency. 

GBP/USD 1-Hour Chart on November 17th

Crude Oil 

The price of Crude Oil this morning is lower than the market open but has not actually declined to a lower swing. The price has formed a descending triangle, which indicates that sellers have the upper hand but are not strong enough to form a further downward slide. For the price to gain momentum and give a clearer downward trend, traders would potentially be looking for the price to break out of the $83.55 support level. 

Crude Oil 1-Hour Chart on November 17th 

The price has been supported as well as pressured from the fundamental side of our analysis. The price has been supported by a lower than expected crude oil inventory. In addition to this, there have been further complications to supply as a tanker was hit by a drone off the coast of Oman. 

However, the price has been pressured by OPEC confirming that they believe demand for the commodity is likely to decline. This is the fifth time since April that the group has advised a decline in demand. This time the cartel has advised it is mainly due to China’s Covid-19 policy and also economic uncertainty. OPEC decreased their demand expectations by 100,000 barrels per day. 

Summary:

• Republicans have won the US elections by a slim majority but create little volatility within the market. 
• FOMC members continue to advise that a 50-basis point hike is an option while a pause is not.
• BoE advises the UK economy is under pressure from Brexit as well as other factors such as inflation. 
• OPEC lowers their demand expectations by 100,000 barrels per day.