UK gilt market and US earnings under the spotlight

GBP/USD=>The pair rises over 1.12

BTC/USD => The cryptocurrency holds over 19k

Bank of America => The stocks rose 3% last week

GBP/USD rebounds on Hunt’s calming words

GBP/USD dropped 1.5% on Friday after Prime Minster Liz Truss fired Chancellor Kwasi Kwarteng and performed yet another U-turn on the mini-budget. This time she announced that the cut to corporation tax was off the table. This means the government still needs to borrow to fund around £30 billion in giveaways. This weekend, new Chancellor Jeremy Hunt, agreed with the BoE over the importance of fiscal sustainability, helping lift the mood towards UK assets. Today there is no high impacting UK economic data. Still, all eyes will be on the gilts market to see how it responds now that the BoE is no longer offering support in the market. Any signs of strong volatility could force the BoE to step in again or Downing Street to make some more changes. Questions over Liz Truss’s ability to hold onto her job until the end of the week could limit the upside to the pound.

Where might GBP/USD go?

GBP/USD has recovered from last week’s low of 0.0923, recapturing the falling trendline support and the 20 sma, which, combined with the bullish MACD, could suggest that there are more gains to be had? Buyers could look for a move over 1.1380, last week’s high, to expose the 50 sma and October high of 1.15. Could a move over here see buyers gaining momentum? Meanwhile, sellers could watch for a move below 1.0923 to create a lower low and possibly bring 1.0650, the Tuesday 27 low, into focus. If this were the case, could sellers start gaining momentum?

 BTC/USD holds in range

BTC/USD continues to trade in a familiar range between 19k-20k in quiet trading across the weekend. Investors continue weighing up concerns over inflation and recession – the same worries that have been plaguing the market for months. The cryptocurrency has traded within this range for months, holding steady even when volatility runs wild in more traditional assets. Interestingly even as Federal Reserve rate hike expectations are rising, Bitcoin continues to hold over $19k. The Fed is looking for evidence that inflation is falling towards its 2% target. However, with core inflation still rising, the US central bank still has much work to do.  There is no high-impacting data due to be released today.  US earnings could drive risk sentiment.

Bank of America Q3 earnings preview

Bank of America is set to report Q3 earnings ahead of the opening today. Rising interest rates will allow banks to earn more from loans and mortgages. However, investment banking revenues are likely to weaken, offsetting gains in net interest income. Furthermore, profits are expected to take a hit from higher bad loan provisions as recession fears rise. BofA is expected to set aside $733 million, in sharp contrast to the release of reserves this time last year. Expectations are for EPS to fall 8.4% from last year to $0.78. It’s worth noting that the bar has been set pretty low for banks’ earnings and earnings as a whole.

Support can be found at 30 (round number) and 29.30 (2022 low).

Resistance for the stock can be seen at 32.60 (October high) and 33.40 (50 sma).

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