Sterling’s price action this week can be described as
messy, as rocky Brexit negotiations between the
United Kingdom and Brussels, left investors on edge.

Sentiment towards the Pound was already fragile amid
the uncertainty, and reports released on Friday,
showing a downward revision of Britain’s annual
growth rate, put more pressure on the currency.

Economic growth in the United Kingdom rose by just
1.5% annually in the second quarter of 2017, which
was down from an earlier estimate of 1.7%. This was
the slowest annual growth since 2013 and continues
to suggest that Britain is struggling to shake off the
Brexit blues. With Brexit uncertainty and soft economic
data weighing on sentiment, it will be interesting to
see how the BoE responds during November’s policy
meeting.

BoE’s Mark Carney was in the spotlight yesterday, as
he delivered the opening remarks at the Bank of
England’s conference, celebrating 20 years of
independence. Investors who were betting on Carney
to reinforce the BoE’s hawkish stance were left empty-
handed, after the central banker sounded somewhat
cautious. What mildly excited sellers, were statements
that the BoE could not be expected to nullify the likely
hit to the UK economy, as a result of Brexit. With
Carney informing markets that the central bank will do
everything it can to support the fragile UK economy as
it tackles Brexit, market players may be forced to re-
evaluate the likelihood of higher UK interest rates. It
should be kept in mind that Brexit has dished out
bucket loads of uncertainty, and this has the ability to
obstruct the central bank’s efforts to take action.

Sterling/Dollar remains under pressure on the daily
charts below 1.3500. Sustained weakness under this
level should open a path lower towards 1.3350. A
weekly close below 1.3350 may signal a further
decline towards 1.3150.

Dollar set for best weekly gain in 2017

It has certainly been a positive trading week for the
Greenback, as hawkish comments from Fed officials
and renewed optimism over Trump’s tax reforms,
stimulated buying sentiment towards the currency.

Dollar bulls were revitalised this week, after Yellen
emphasized the need for gradual rate hikes. Trump’s
tax reform blueprint, which he says will be the largest
tax cut in the history of U.S., also gave a boost to
sentiment towards the U.S. economy. With U.S.
economic growth for the second quarter revised higher
at 3.1%, the ingredients for the Fed to raise U.S.
interest rates in December are falling into place.

From a technical standpoint, the Dollar Index is turning
increasingly bullish on the daily charts. Although the
Dollar extended losses against a basket of currencies
on Friday, on the back of profit taking, buyers still
remain in control above 92.50. While optimism over
the U.S. economy is likely to keep prices buoyed, a
catalyst may be needed to jolt the index back above
93.50. This could come in the form of a solid U.S. jobs
report next week.

Euro rises on positive economic fundamentals

Euro bulls were active on Friday, after data released in
the previous session showed that Eurozone economic
confidence hit its highest level in more than 10 years,
in September.

While the Euro may edge higher in the short term amid
the positivity, political uncertainty in Europe is likely to
create headwinds for bulls down the road. As we head
into the final trading quarter of 2017, the EURUSD
could be in store for a rough and rocky ride. With the
Dollar regaining its mojo amid rising rate hike
expectations and the Euro finding support from QE
taper expectations, bulls and bears are gearing for a
tough tug of war.

From a technical standpoint, the EURUSD is under
pressure on the daily charts. Previous support around
1.1850 could transform into a dynamic resistance that
encourages a further decline towards 1.1680.

Repeated weakness below this price should signal an
end to the weekly bullish trend, with the next level of
interest at 1.1500.

Commodity spotlight – Gold

Gold tumbled to its lowest level since August during
Thursday’s trading session, and headed for the
biggest monthly decline this year, as optimism over
Trump’s tax reforms boosted the U.S. Dollar.

The downside was complimented by firmly hawkish
comments from Janet Yellen earlier in the week, which
reinforced expectations of a U.S. interest rate hike in
December. With the Dollar likely to appreciate further,
amid rate hike expectations and optimism over tax
reforms, Gold remains vulnerable to further losses.

Although the yellow metal has edged slightly higher
during Friday’s trading session, bears remain in control
under $1300 with breakdown below $1280, opening a
path towards $1267.

TheCable