FXTM Research Analyst Lukman Otunuga said investors should be under no illusion that the recent boost to the Sterling has not changed the bearish sentiment against the British currency.
In his comments on the recent reports confirming that Theresa May will be triggering Article 50 on the 29th of March, Otunuga said it is already sparking jitters, and the Sterling may be in-store for some serious punishment this week.
He said while the US dollar weakness has encouraged bullish investors to elevate the Sterling/Dollar to a fresh three-week high at 1.2436 during Monday’s trading session, it is becoming clear that the Brexit developments are likely to dictate where Sterling trades in the medium to longer term with uncertainty effectively limiting any extreme upside gains.
From a technical standpoint, Sterling bears may re-enter the scene back below 1.2300.
Risk sentiment dented by protectionist fears
Stock markets were under noticeable pressure during Monday’s trading session with risk appetite absent after the G20 decided to drop a pledge to avoid trade protectionism.
Asian shares concluded mostly mixed amid the sluggish trading mood while risk aversion exposed European equities to downside losses.
Although Wall Street limped into gains last week, further upside may be limited this evening as the renewed protectionism concerns keep investors on edge.
With major finance leaders from the largest economies in the world failing to persuade the US to renew an anti-protectionism pledge, the growing threat of a potential global trade war may create serious headwinds for this phenomenal stock market rally. wrote Otunuga.
Dollar Index levitates above 100.00
The lingering impacts of last week’s “dovish hike” can still be seen on the Greenback which remains on the back foot as of writing.
Although sellers have exploited the disappointment from the Fed’s less than hawkish stance to attack the Dollar Index repeatedly, the downside may be limited as sentiment improves towards the U.S economy.
“Investors may pay extra attention to the string of speeches from Fed officials this week which could offer further clarity on interest rate hike timings this year.
“A hawkish surprise could install Dollar bullish investors with enough inspiration to send prices back towards 101.00,” he said.
From a technical standpoint, the Dollar Index remains heavily pressured on the daily charts. The 100.00 psychological support remains a key level which could protect the bulls or assist the bears.
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