The bank holiday is over in North America, and the market is getting ready for increased trade volumes due to returning investors.
The main stories in the market catching investors' attention are mainly related to OPEC’s supply cut, the new UK Prime Minister, and higher interest rates in Australia. All have indeed created strong price reactions, including reverting and trending markets.
Crude Oil Outlook
OPEC’s decision to cut supply outputs did not come as a shock to the financial markets. This is something that most OPEC members have voiced over the past two weeks due to price volatility and their attempt to maintain a higher price per barrel.
Clearly, member states feared the price would continue to fall back to the price ranges seen over the past decade. This most likely would have been triggered by restrictive monetary policies and high inflation around global economies.
The group has only cut 100,000 barrels per day, which is a small amount. According to Citigroup, the move is not likely to change the level of supply vs. demand, and OPEC is simply sending a message out to the market.
According to Citigroup, the bearish factors are currently stronger than the bullish ones, specifically due to the higher risk of a recession and inflation likely to strongly cut into disposable incomes over the next 3-4 months. According to experts, this can strongly affect the demand side of oil.
The price has increased over the past few days due to the positive employment figures in the US and also supply fears triggered by a G7 agreement to place further restrictions on Russia Oil.
However, the Russian energy minister Mr. Shulginov said the country would ship more oil to Asia in response to price caps on its oil exports. Therefore the commodity may still find its way into the market.
AUD/USD - Technical View
AUD/USD continues to move in a descending triangle pattern which first formed earlier during this morning’s Asian Session. A descending triangle pattern indicates a break in the trend or temporary bullish price movement.
RBA's decision to increase interest rates as expected supported the price in the ultra-short term. However, the price formed a full price correction declining by almost 50 PIPs.
The Reserve Bank of Australia increases interest rates for a fourth consecutive month by 50 basis points. This has brought the RBA’s Key Rate to 2.35%, the highest in 7 years. The Central Bank advised they will keep “increasing rates over the coming months” and aim to bring inflation down to at least 3%.
However, investors are not too certain as to whether the price will be able to maintain momentum after some support from the rate increase. This is due to the status and strength of the US Dollar, which has increased demand during more economic uncertainty. In addition, the price is also pricing in a 75 basis point hike later in the month, which is higher than the stance the RBA took.
EUR/GBP - Technical View
The EUR/GBP is hovering at a 2-month high but has lost momentum at a significant resistance point. The price has declined for two consecutive days and has lost momentum since last Thursday. Investors are also cautious about the resistance point, which has caused the exchange rate to decline in the past.
The main talking point is that Liz Truss became the new Prime Minister. Mrs. Truss received 81,326 votes from representatives of the country's Conservative Party, while 60,399 votes were given to ex-finance minister Rishi Sunak.
He was in the lead in all five rounds of the election campaign, but most political experts advised that Mrs. Truss was almost sure to win. It is hard to determine how fiscal changes will affect the currency. This is because the market is not yet certain how the new PM will approach fiscal policy.
During debates and speeches, the new PM indicated she would lower taxes and support economic growth, which could potentially support the demand. Still, at the same time, it may also further fuel inflation. So far, the GBP/USD has been strengthening on the back of this news.