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Sterling Steady ahead of UK Services, Euro Rebounds and Gold Shines

By:
Lukman Otunuga
Updated: Oct 3, 2018, 11:51 UTC

The past few days have certainly been eventful for financial markets as investors tussled with global trade developments, Brexit related uncertainty, turmoil in Italy and rising commodity prices

Sterling Steady ahead of UK Services, Euro Rebounds and Gold Shines

The past few days have certainly been eventful for financial markets as investors tussled with global trade developments, Brexit related uncertainty, turmoil in Italy and rising commodity prices.

Investors initially entered the trading week adopting a “risk-on” approach, after Canada signed a trilateral trade deal with the United States and Mexico over the weekend. However, the sense of optimism was washed away by ongoing US-China trade tensions and growing uncertainty over Italy’s budget plans. With the developments in Italy prompting investors to stay away from riskier assets, safe-haven investments like the Japanese Yen and Gold are back in fashion.

Speaking of safety, Gold is likely to remain in the spotlight after gaining roughly $18 during Tuesday’s trading session. The yellow metal caught markets by surprise as it soared from $1190 to $1208 as jitters around the Italian budget deficit fuelled global risk aversion. With the precious metal powering even higher against a broadly stronger Dollar, the outlook does point to further upside in the near term. However, the medium to longer term outlook remains bearish as the fundamental factors weighing on Gold remain intact.

In the currency markets, the Pound remains pressured by Brexit uncertainty and political drama in Westminster. Growing fears of a hard Brexit scenario have eroded buying sentiment towards the currency and this continues to be reflected in the overall price action. Much attention will be directed towards the pending UK services PMI report for the UK which could offer some insight into the health of the economy. While a positive report has the ability to send the Pound higher, gains remain threated by Brexit related uncertainty.

The Dollar is poised to remain King as US-China trade tensions continue to weigh on market sentiment. The Dollar Index has already punched above 95.70 this week with further upside on the cards as long as bulls can defend 95.00. All eyes will be on Friday’s US jobs report which will play a very significant role in where currency concludes this week.

Currency spotlight – EURUSD

The Euro has rebounded this morning on reports that Italy will trim its budget deficit at a faster pace than expected. While this welcome development could push prices higher in the near-term, the outlook remains bearish on the daily charts. A solid daily close below the 1.1550 could encourage a move towards 1.1480.

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About the Author

Lukman Otunuga is a research analyst at FXTM. A keen follower of macroeconomic events, with a strong professional and academic background in finance, Lukman is well versed in the various factors affecting the currency and commodity markets.

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