The post-Brexit rally on global equities, Oil and the GBP are running out of steam, with crude futures touching the $50 mark but switching direction downwards soon after. WTI has been trading in relatively tight range of 49.55-49.10, while its London traded peer, Brent, tested the $51 mark but found strong resistance near the key area, sending the benchmark to the 50.50 level.
Prices on both grades covered panic-stricken sell-off, triggered by the UK vote to break up with the EU, but further advance is capped by the threat from the US shale industry and growing exports from Iran.
As the energy market halts recovery, it becomes hard for risky assets to find a catalyst for further growth. After small gains in early London session, German DAX and UK FTSE 100 turned negative, driven by commodity producers losing value. The losses are also fuelled by the rebound of the US Dollar index, showing that the USD is trying to regain strength. Gold declines despite risk asset markets being very cautious, XAU/USD dropped by 0.46% at 1,320.70.
The markets have no clue what the long-term effects of Brexit are, as European and UK companies had little time to prepare for the dissolution and were basically caught off guard.
Current rally is likely to be a correction after the sharp drop before the actual situation clears up. It is not likely to see further risk asset growth amid the gloomy picture of Brexit’s impact, considering large investors are sitting in government bonds – one of the safest assets.
The Euro and Pound broke the winning streak seen earlier this week, EUR/USD lost 0.20%, sticking around the 1.11 level, GBP/USD levels out, trading near Wednesday’s close at 1.3431.
The Japanese Yen shows signs of upside movement, but sticks near the close at 102.74. The Australian Dollar pares down Oil fuelled gains against the US Dollar, trading at 0.7438 (-0.19%).
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