GBP AND FTSE NOSEDIVE AFTER WEAK UK JOBS DATA

The British pound declined sharply as investors reacted to another set of weak economic data from the UK. According to the Office of National Statistics (ONS), the country’s unemployment rate rose from 3.7% in March to 3.8% in April. This increase was worse than the median estimate of 3.6%. Average earnings with bonuses fell from 7.0% to 6.8%. These numbers came a day after data revealed that the country’s economy contracted for the second straight month in April. Therefore, there are concerns that the Bank of England will find it difficult to hike interest rates.

European stocks continued their sell-off as concerns about inflation continued. In Germany, the DAX 40 index fell by 0.80% while in France, the CAC 40 fell by more than 1.10%. This decline was a continuation of what happened on Monday. Data by the German statistics agency showed that the country’s inflation rose from 0.8% to 0.9% on a MoM basis and by 7.9% on an annualized basis. Similarly, in Sweden, inflation jumped to 7.3%, the highest level since 1991. There are concerns that this inflation will affect demand and corporate margins.

US futures tilted higher on Tuesday as investors price in a more hawkish Federal Reserve. Investors now believe that the Fed will be more hawkish than earlier expected. Many of them expect that the committee will hike interest rates by 0.75%. Some of those who are pricing in a 75 basis point hike are from Barclays and Goldman Sachs. The extremely hawkish view is because the Fed misjudged how high and fast inflation would rise. At the same time, there are concerns that many American stocks will be hit by the strong US dollar.

GBPUSD

The GBPUSD pair continued its bearish trend after the weak UK data complicated the BOE’s situation. It is trading at 1.2075, which was the lowest level since 2020. As it dropped, it moved below the important support level at 1.2154. It crashed below the 25-day and 50-day moving averages while the Relative Strength Index crashed below the oversold level. Therefore, the pair will likely continue crashing in the near term.

EURUSD

The EURUSD pair bounced back slightly after the latest German inflation data. It is trading at 1.0447, which is higher than this week’s low of 1.0380. It is still below the 23.6% Fibonacci retracement level while the RSI has moved slightly above the oversold level. The pair is also below all moving averages. This relief rally is likely a dead cat bounce, meaning that the pair will likely resume the bearish trend.

ETHUSD

The ETHUSD pair declined sharply as the crypto sell-off continued. The pair is trading at 1,176, which is higher than the intraday low of 1,072. It has moved below all moving averages while the MACD has moved below the neutral point. The RSI is also at the oversold level. Therefore, the pair will likely continue falling as sentiment wanes.