U.S. Dollar Attempts a Recovery; UK Reacts to New Budget
NAGA | Nov 18, 2022 08:38AM ET
Investors in the UK are relieved yesterday’s budget did not see a similar reaction to the one back in September. The UK released its latest mini-budget, which included a range of tax increases and spending cuts. Since the announcement, the pound sterling came under pressure from a rise in the US dollar but has since fully corrected.h2 UK Mini-Budget and the GBP/h2
The mini-budget was clearly not aimed at inflation, the cost of living, and energy prices, all concerns at the top of citizen's lists. The mini-budget was aimed at mainly satisfying British Bonds and the pound investors.
According to the Office of Budget Responsibility, the UK economy is expected to instantly fall into a recession and decline by 1.4% in 2023, with inflation remaining firmly above 7%.
The US dollar was supported by comments made by members of the FOMC, such as Governor Mester and Jefferson. The dollar was supported by senior members confirming that even though they may consider a lower rate hike, it does not mean there will be a change in the terminal rate. The FOMC members also made it very clear that they will not cut rates any time soon.
The US dollar increased in value by 1.40% against the GBP, 0.83% against the euro, and 0.98% against the yen. However, the dollar could not hold onto gains against the pound and euro as the exchange rate fully corrected shortly after.
Lastly, the US stock market continues to move within a retracement but has not seen enough momentum to give indications of a downward trend. The stock market has also come under slight pressure from a poor-performing cryptocurrency market, which has affected investors' risk appetite.
Visa (NYSE:V) specifically came under specific pressure as it signed an agreement with FTX a month ago to issue debit cards with support in 40 countries around the world. However, analysts believe the stock may rise slightly due to its positive earnings.
h2 Crude oil View/h2During yesterday’s market analysis, we discussed crude oil's breakout .
The breakout took place at $83.55 and triggered the price to decline by a further 2.88%. The price is now hovering at $81.87, and traders are waiting for a further breakout to obtain further signals potentially.
Get The News You Want
The downward trend was primarily fuelled by poor economic data from China, which is a big buyer of crude oil. The Chinese property market has already declined over the past few months.
However, Moody's (NYSE:MCO) experts have advised that the Chinese Property Market will decline between 10-15% throughout 2023. The Chinese government also confirmed another increase in COVID-19 cases, having investors worried another lockdown might be on the horizon.
In addition, the price came under pressure from recession talk from the UK Chancellor. The UK is the 11th highest importer of crude oil.
The price also slightly declined as NATO and Russia both confirmed that the missile which hit Poland was not Russian-made nor came from Russia.
Lastly, crude oil inventories had significantly declined, which can slightly support the price of oil, but Gasoline inventories increased by more than 2 million barrels. The rise in gasoline stock is known to pressure the oil price.
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.