Summary:
- Second consecutive day of heavy declines for cryptocurrencies. Bitcoin -8%
- BoE stand pat but hawkish talk boosts GBP
- UK100 falls to test key support
- Oil.WTI at 6-week high and back above $50
- Pick up in US inflation supports USD recovery
The cryptocurrency market has experienced wild volatility of late mainly on the back of adverse stories coming from China. Moreover, the CEO of JP Morgan Chase has also weighed in on that topic calling it “a fraud” being even “worse than tulip bulbs”. Today has seen an extension of Wednesday’s major declines with all 5 cryptocurrencies experiencing heavy selling, with Bitcoin falling some 8% and below 3500.
Central banks have been having a major impact in the FX space int he past couple of weeks and the Bank of England (BoE) kept this run going today, with some hawkish rhetoric in the minutes seeing GBP surge higher. In particular a line reading that all MPC members believe the market is “under-pricing future interest rate rises” saw a surge in demand for the pound with the GBPUSD pair hitting another 1-year high and trading close to 1.34.
One side effect of a stronger pound however, is the negative FX implications it has on many of the largest stocks on the UK100 (FTSE underlying). The market has moved lower since the BoE announcement at Midday, and the index now trades not far from its lowest level since May. Price is once more testing prior support around 7295 which has attracted buyers into the market on numerous occasions in recent months.
We noted that Oil.WTI held up relatively well yesterday despite the largest increase in weekly DOE inventories in 6 months. When a market doesn’t drop on what appears to be negative news, it can reveal an underlying strength behind the price and this may be viewed as a bullish sign. Sure enough today has seen price rally, and even though some of the increase can be attributed to the contract rollover with the new underlying trading 42 cents higher, the market would have gained regardless.
Inflation in the US economy is picking up according to the latest economic release with the CPI M/M showing a 0.4% increase for the month of August. This rise represents the biggest jump since January and ends a run of 5 consecutive misses for this data point. A rise to 0.3% was expected after a marginal increase of 0.1% was seen last time out, so today’s print could be described as something of a positive surprise.