Over the past 48 hours, the currency market has been quiet with little volatility on most currency pairs, but that is likely to change for the rest of the week with news expected from the US and the UK.
The UK released a report last night which has already got the ball rolling, but not necessarily in favor of the UK. The report relates to a possible energy crisis in the UK if Norway and the European Union lower gas supplies. According to the report, a plan has been put in place if levels run low due to a cold winter.
Across the Atlantic, investors are awaiting the release of the Consumer Price Index which is predicted to slow significantly. Most markets have stalled as investors await confirmation from the US Bureau of Labour Statistics.
We can see that the US Dollar Index has remained more or less static over the past 48 hours, and the stock market has slightly declined. The NASDAQ saw the largest decline losing 1.15%, followed by the S&P 500 which lost 0.42%, and the Dow Jones which declined by 0.18%.
Commodities and cryptocurrencies have also taken a hit over the past 12 hours as we are approaching the announcement. Crude oil prices are again struggling and have declined below $90 per barrel. Gold has also slightly declined but so far has not formed anything more than a retracement in the bullish trend. Lastly, Bitcoin has declined by over 5% over the past 24 hours.
GBP/USD - Technical View
The pound sterling has been in a downward trend against the US dollar and most other competitors since the 1st of the month. This month the price of the asset has declined by just shy of 0.80%, but again as mentioned above, the price movement has been uncertain this week so far.
Developments in the UK are not positive for investors, and the energy report released last night has not given confidence to market participants. According to the report, there is a high risk that if the region sees a cold winter and supplies continue to remain low, the UK may see a shortfall of ⅙ of the demand. As a result, the UK has implemented a plan to see electricity rationed for certain homes and businesses from January onwards.
Economic news from the UK is a mixed bag of both positive and negative news. The latest retail sales data for July was released during yesterday’s trading session and showed growth of 1.6% instead of the expected decline of 1.5%.
In general, consumers seem to be optimistic, despite the warnings of the Bank of England about an impending recession. This could also result from the summer months, where citizens normally spend more. Nonetheless, the figure was much higher than previously expected.
Additionally, the UK government has also recently come under strong criticism for being more concerned about the election of a new Prime Minister rather than assisting businesses and the public with the cost of living rising, especially electricity prices. Earlier, the leader of the race for Prime Minister reiterated that she favors tax cuts instead of providing direct support to households facing an unprecedented increase in costs which did not go down well with the public.
In the States, investors are more concerned with the Consumer Price Index, which will be released this afternoon and will most likely have the strongest influence this week. The UK’s GDP figure is scheduled to be released Friday morning. Over the past two months, the CPI figure has recorded inflation between 1% and 1.3%.
It is predicted to be much lower at 0.2%, but this does not necessarily mean the index will not creep back up in September-October. A higher-than-expected figure will be deemed positive regarding the monetary policy and the dollar. The UK’s Gross Domestic Product is predicted to show a decline of 1.2%, which is the highest decline in a year. Investors will be closely following.
Tesla Stock-Split
Tesla (NASDAQ:TSLA) stocks have seen strong declines over the past four trading sessions. The price declined by 2.44% in yesterday's trading session, and the stock has been down 8.74% over the past four sessions. Elon Musk's decision to sell almost $7 billion worth of Tesla stocks is a significant development, even though he had previously advised this would not happen.
According to Elon Musk, the stocks were sold after the firm's annual shareholder‘s meeting last week. Therefore, this may have possibly been the reason for the recent decline. According to Mr. Musk, the decision was taken just in case he is forced by the court to pay Twitter (NYSE:TWTR) compensation or even buy the company.
A positive development for the stock is that the company has decided to perform a classic stock split again. Previously, this had supported demand for the stock as it enabled more investors to purchase the asset. According to the company, each stock will be split by 3.