Article / 04 August 2016 at 6:59 GMT

Morning Markets: GBPUSD slides ahead of expected BoE cut

Head of Editorial Content / Saxo Bank

Morning Markets: Prices



  • UK: Interest rate decision (1100 GMT)
  • US: Unemployment weekly claims report, initial claims (1230 GMT)
  • US: EIA Weekly natural gas storage report (1430 GMT) 

The Asian session saw a broad, upward movement in equity prices after a rally in crude oil boosted risk sentiment. The yen, meanwhile, broke what appeared to be support at the 101.10 level, diving to below 100.90 before rebounding to range highs.

Today's session sees the Bank of England in the spotlight as the "Old Lady of Threadneedle Street" is expected to slash interest rates for the first time since 2009 in response to poor post-Brexit macro readings.

The BoE release is near-certainly going to result in some major GBP movement, with the only question being: which way? Yesterday, Saxo Bank technical analyst Kim Cramer Larsson said that a break of the lower trendline in GBPUSD could see a return to the 1.28 level seen in the immediate aftermath of the Brexit vote; if cable holds the 1.33 line, however, Cramer Larsson says a move higher t0 1.3650 could be on the cards.

Heading into the New York session, we have US initial jobless claims and factory orders data up this afternoon, with the former likely to take on some weight as a potential sign of what Friday's nonfarm payrolls release may have in store. On Wednesday, the ADP jobs data showed the US jobs scene to be roughly in line with projections, with the release showing 179,000 new private-sector jobs versus 178,000 expected and 172,000 last month.

Market signals

Asian session

  • Australia's retail sales in June rose just 0.1%, the slowest pace in three years
  • Asian markets opened higher, buoyed by the rally in oil prices
  • Oil prices rose more than 3% overnight
  • Japanese government bond selloff continues
  • S&P/ASX 200 rallies sharply in early session, but closes just 0.18% up
  • Hang Seng index posts 0.51% gain; Nikkei rises 1.07% on weaker yen
  • Siemens reports strong quarterly results with revenue rising by 5% to €19.8 billion

Forex ahead

  • USDJPY weakens as pair surges to range highs following sub-101 dip
  • Sterling plunges aheead of European session and expected BoE rate cut
  • GBPUSD tumbled from 1.3330 to 1.33 in the space of minutes around 0600 GMT
  • Sterling gains against weakening yen overnight
  • GBPJPY heads from 134.50 to 135.20 ahead of Europe open

From the Floor

The uncertainty trade. "Gold could target $1,500/oz again," says Larsen.

Game-changer. "Equities are green, but we'l see what happens after the BoE speaks," says Garnry.

Get all the latest from Saxo Bank's trading floors in From the Floor, within the hour.

In opinion

Mounting evidence of slowing and perhaps negative growth in the near term suggests the Bank of England will unveil an interest-rate cut today, says James Picerno.

Radical action
The most radical way the BoE can help create the conditions to ward off recession is to slash rates and see the benefit passed on by banks, explains Stephen Pope.

EM bonds doing well
This year will doubtlessly be remembered for the stellar performance seen in bonds, in particular EM bonds, writes Simon Fasdal in his weekly bond update

What's next for the Aussie?

Now that the RBA has gone ahead with its rate cut, the global hunt for yield could see the AUD head higher despite a dovish central bank says Kay Van-Petersen.

Crude awakening

The resurgence seen in oil prices could act as a tonic for Britain's beleaguered benchmark index, says trader Steve Lucas.

Bank of England

Today's BoE decision is likely to see a major sterling move, the only question 

remains: in which direction? Photo: iStock

Morning Markets goes out on the TradingFloor platform at 0700 GMT, Monday to Friday.
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