BOE Minutes Show Policymaker Concerns about Weakening Global Economy

The GBP/USD sold-off sharply after the release of the latest minutes of the Bank of England. The minutes showed BOE members saw greater risks to the U.K. from a slump in the Euro Zone economy, damping investor bets on an increase in interest rates.

According to the minutes, two BOE policymakers voted to increase the official interest rate by 25 basis points and the remaining seven decided to leave rates unchanged. The minutes also highlighted growing pessimism about the global economy.

The EUR/USD was under pressure as investors continued to weigh the prospects of additional easing by the European Central Bank. Yesterday, the Forex pair broke after Reuters reported the ECB was considering buying corporate debt. Central bank officials denied the story. Nonetheless, investors pressed the market anyway since more stimulus is bearish for the home currency.

The market is bearish and traders are waiting for more news about Euro Zone inflation before making their next move. Also holding the market in a range are concerns about the U.S. Dollar and whether the slowing global economy will encourage the Fed to delay its expected interest hike.

The stronger U.S. Dollar is putting pressure on December Comex Gold today. Yesterday, the market completed a 50% retracement of the break from $1324.30 to $1183.30. Since the main trend is down on the daily chart, many counter-trend buyers took profits at this level and some bearish traders may have re-entered on the short side. If the rally stalls at yesterday’s high at $1255.60, then watch for a possible retracement of the rally from $1183.30 back to $1219.50.

Gold is mirroring the move in the U.S. Dollar so traders should keep an eye on this market for clues regarding direction and volatility. Today’s U.S. consumer inflation data could have a strong effect on gold if it considerably misses the estimate of 0.2%.

December crude oil futures are trading flat-to-higher. Since last week’s plunge to $79.10, the market has consolidated but is not expected to accelerate to the upside unless $84.08 is taken out with conviction.

Overproduction by the U.S., Russia and Saudi Arabia are major concerns along with weak demand because of the slowing global economy. Today, the Energy Information Administration will release its latest weekly supply/demand data. For the week-ending October 17, traders expect the EIA report to show an increase of 2.8 million barrels. Last week, traders were surprised by an increase of 8.9 million barrels.

Today’s U.S. Consumer Inflation report showed an increase of 0.1% on headline and core inflation. The numbers are in line with expectations.