The Bullet Report: GBP Sinks after BoE cuts rates, NFP to spark even more Volatility

On the final day of the week, the focus shifts to the all-important non-farm payrolls report which happens on the first Friday of each month. The report, which measures the additions in the labor force in the US is expected to unveil a rise of 180.000 jobs added in July. The actual result, if significantly different from the expectation of 180k will trigger a lot of volatility, which in addition to yesterday’s price action especially in the GBPUSD will ensure big trading opportunities, however caution should be advised.

Currencies: Yesterday the BoE delivered a significant set of measures to fight off the looming recession in the UK. Particularly, the Bank cut interest rates by 0.25% and in addition increased the purchasing of stock assets bringing the total monthly amount of easing to 70 billion GBP, while at the same time, indicated that further rate cuts this year cannot be excluded. As a result, the GBPUSD sinked almost 250 pips from the daily highs of 1.3344 to 1.3101. On the contrarry, AUDUSD is firm and set to close the week generally higher, except versus Yen, in spite of RBA’s rate cut earlier in the week. RBA sounded upbeat in the monetary policy statement released today, saying that “while the prospects for growth in economic activity are positive, there is room for even stronger growth.” Today, the USD Index, is steady at 95.775 after gaining 0.2% yesterday.

Stocks: Asian shares followed global stock markets higher on Friday after the Bank of England launched a larger-than-expected post-Brexit stimulus package that sent the GBP tumbling. An overnight rally in crude oil prices also sharpened risk appetite, but some caution before the July U.S. non-farm payrolls report later on Friday limited gains.

Oil and Gold: Oil prices bounced mightily back above $40 a barrel on Wednesday. Crude oil prices added 3.3% to $40.81 in recent trading after falling as lows as $39.19 earlier in the day. The price of U.S. crude dipped under $40 this week for the first time since April. Gold rose, remaining near 2.5 year highs. It traded between 1355 and 1371, closing higher for the 7th time over the last 8 sessions. Since opening the year near $1,075 an ounce, Gold has soared approximately 29% over the last six months and is on pace for one of its strongest years in a decade.

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