Sterling gains as Sunak looks to lead conservative party
|Since trading opened in foreign exchange markets last night, we've seen a warm response amongst investors to news that Boris Johnson has pulled out of the running to return as UK Prime Minister. Certainly there was some trepidation in the markets that Boris could return as fiscally he is not seen as highly competent but perhaps more troubling would have been the fact any new premiership under Johnson would be surrounded by political potholes every week, bringing more instability. Many market participants are reacting positively to the potential of Rishi Sunak becoming the next UK prime minister after several days of uncertainty while members of the conservative party attempted to determine their choices. The Pound started the week trading higher as many see the new potential PM as a source of some stability, particularly when compared to the chaotic term served by the Truss government which saw massive volatility across markets which also led to a large drop in the pound. Furthermore, many see Sunak as the final chance for the conservative party as he has managed to maintain some credibility and is now set to make an announcement during the day which may also lead to a market reaction as stocks struggle to extend the upward move and have been pulling back.
Oil prices start the week lower as uncertainty persists
Oil prices have struggled to break out of their recent sideways trading range which has seen WTI prices hover in the $83.60 area while Brent continues to have trouble breaking through and remaining above the $90 level. Rising USD strength along with global demand uncertainty continue to pressure commodity prices along with riskier assets with stock markets also starting the week lower. From a technical point of view, the price of oil remains in a very interesting spot as both Brent and WTI are testing key support levels which managed to halt previous strong downward moves despite the price being below the longer term SMA’s. Furthermore, the situation could continue to be volatile which could lead to another attempt to rebound from the current levels if sentiment and demand forecasts manage to improve despite the ongoing economic slowdown and troubling macroeconomic data. In either case, a breakout in either direction could set the tone for the market in the short term in this time of increased volatility.
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