HUBFX Market Report – End of October, 2024

Overview

Today’s market movements reflect a complex interplay of political developments, economic indicators, and sector performance. Notably, the UK financial landscape is under scrutiny following the Labour Party’s first budget in 15 years, leading to significant shifts in bond yields and currency valuations.

UK Economic Developments

A spokesperson for Labour leader Keir Starmer commented on the party’s stance regarding market movements, stating, “we do not comment on market movements.” This statement has not only drawn attention but also fueled discussions about the implications of the newly introduced fiscal rules aimed at restoring stability to the UK economy.

UK 10-year gilt yields saw a notable rise, peaking at 4.53% before retracting slightly to 4.49%, reflecting a 14 basis point increase for the day. The response from BMO suggests a shift in expectations regarding the Bank of England’s upcoming monetary policy meeting, with predictions leaning towards maintaining current interest rates rather than enacting cuts, currently priced at 21% for ‘no change’.

Currency Market Dynamics

The GBPUSD pair has faced considerable pressure, breaking below the crucial support level of 1.2938 and testing a significant swing area. The current trading sentiment appears bearish, with further support levels set at 1.2866 (the 50% midpoint) and 1.28078 (the 200-day moving average). Resistance is expected around 1.29064 and the key level at 1.2938.

Conversely, the EURUSD attempted a breakout earlier but failed to sustain momentum, retreating back into its recent trading range. Current key levels include 1.08427 (today’s low) and the upper resistance at 1.08725. A decisive break below 1.08427 could lead to further downward movement, while a recovery above 1.08725 would signal a potential reversal in sentiment.

Commodity and Equity Insights

Gold prices have plummeted more than $50, currently trading at $2734. This significant drop is attributed to a broader “sell everything” sentiment as market participants adopt a cautious stance ahead of the upcoming elections. The outlook for gold remains uncertain, especially if election outcomes result in fiscal instability, which could drive yields higher and bolster the dollar.

In the equities market, the tech sector is experiencing notable declines, with Microsoft down nearly 5% following its earnings report. This has raised concerns among investors regarding future growth trajectories in tech. Conversely, the financial sector shows resilience, buoyed by robust consumer spending data, with Mastercard and Visa leading the gains.

Conclusion and Recommendations

As we navigate the final day of October, market participants should remain vigilant amidst the evolving landscape. The interplay between UK fiscal measures and global economic sentiment will be crucial in shaping FX movements and broader market dynamics.

Strategic Recommendations:

• GBPUSD: Monitor support levels closely. A break below 1.28449 may signal further selling pressure.
• EURUSD: Watch for a potential return above 1.08725 for signs of a bullish reversal.
• Gold: Consider potential buying opportunities around the $2700 mark if prices stabilize.
• Equities: Focus on the financial sector for stability, while exercising caution in tech investments.

Stay tuned for further updates as we approach the key events on the economic calendar and potential shifts in monetary policy.