GBPUSD attempts to recover losses

The UK economy was provided with another reminder during trading today that the extended period of low headline inflation that the economy has been encountering for over a year was going nowhere, following annualised inflation for April falling to 0.3% in comparison with the 0.5% increase seen in March. This represented the first decline in headline inflation for around seven months with this occurring despite a substantial rebound in the price of oil and also a relatively weak British Pound due to the ongoing EU referendum uncertainty, which would have disappointed spectators that were probably expecting another improvement in headline inflation.  

Regardless of the ongoing EU referendum uncertainty dominating headline attention with this understandably going to be the case until at least the outcome of the historic vote is announced, the UK economy is encountering a noticeable decline in economic momentum with leading PMI indicators across the board weakening and this extended period of low inflation is also going to be pivotal towards the Bank of England (BoE) remaining in no rush towards moving UK interest rates.

The GBPUSD is attempting to recover losses following the currency pair hitting a monthly low on Monday around 1.4332, which is largely a technical correction after the Cable found itself under pressure since the comments from BoE Governor Mark Carney that a “Brexit” outcome in June might lead to a technical recession for the UK economy. The GBPUSD has managed to extend towards 1.4523 after hitting Daily support at 1.43 but the 1.45 region is seen as a possible peak for this currency pair, meaning we need to close above 1.45 otherwise the recovery of losses could be short-lived.

WTI oil reaches another 2016 high

Most market headlines on Tuesday are focusing on the oil markets, after the commodity managed to record another milestone high for 2016 with WTI Oil reaching just above $48.40. While headlines are focusing around the possible disruption to oil output following the wildfire in Canada, I generally think buyers have been encouraged towards oil since the report from OPEC that shrinking US output and massive cuts to investment projects will reduce the global oversupply in 2016 and also the announcement late last week from the IEA that global inventories are set to suffer from a dramatic reduction.

It is the combination of indications from major institutions such as OPEC and the IEA around the global oversupply coming to a possible conclusion that have generally improved investor sentiment towards oil. While the recent gains have been impressive, it is worth mentioning that WTI Oil is expected to face major resistance around $48.50 and this could prevent a return towards $50 for the commodity.

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