Sterling resumes slide against the dollar

Tuesday, July 29, 2014

Despite the bullish tones in Europe, sterling softened against the dollar, dropping below the 50 day MA towards 1.6940 as it traded at its lowest level in over six weeks. The pound has shed a significant portion of June’s gains throughout the second half of July, closing lower against the dollar in all but one of the last ten sessions. Investors are cautious of any evidence of rising inflation which would prompt a rapid rise in interest rates and further concerns of an overheating housing market could crimp any gains for GBP against USD, especially as US markets continue to strengthen.

European markets bounced back on Tuesday as geopolitical tensions took a backseat and investors chose to focus instead on corporate earnings. London’s blue chip index was spurred higher after fashion retailer Next and engineering group GKN posted better than expected results. Wider European markets were lifted by bullish earnings from the likes of Deutsche Bank and UBS. The positive sentiment managed to carry over to Wall Street, with Pfizer and Merck posting stronger Q2 earnings, helping the benchmark S&P 500 to early gains towards 1,985. In a sparse session for economic data investors anticipated the Conference Board consumer confidence index, which didn’t disappoint, posting a surprise increase to 90.9 in July from 86.4 the previous month.

Spot gold prices breached tentative support at the 100 day MA today, trading just below $1,300/oz after consolidating sideways-to-lower throughout the second half of July. Firm support levels around $1,280-90 remain intact but any breach of these levels as investors pull out of the yellow metal in favour of higher yielding assets could see declines towards previous consolidation around $1,270/oz.

GBP trades below the 50 day MA against USD

GBP Curncy British Pound Spot 2014 07 29 16 13 05

Gold trades below $1,300/oz

XAU Curncy Gold Spot Oz 2014 07 29 16 30 13

Topics: USD, Gold, GBP
More from: Kash Kamal