Markets React To Plunging Oil Prices

Binary options traders wasted no time after this comment and shorted the sterling accordingly. The recent MPC decision went 5:3 in favour of maintaining the interest-rate. What is significant about it is that this marks the first time in 6 years that there has been such divergence between Monetary Policy Committee (MPC) members on the topic of a rate hike. The biggest problem facing the United Kingdom now is rapidly increasing inflation and slow or no real wage growth. This is leading to a cash crunch in the UK economy with personal disposable income levels quickly drying up and GDP about to contract.

What about Market Volatility in Global Indices?

One of the broad measures of current investor sentiment is the VIX (the volatility index). Currently the volatility index reflects low volatility levels in global stock markets. This is somewhat surprising given the Brexit-related anxiety, recent tensions between Russia and the US, and a sharp uptick in oil production among OPEC and WTI crude oil producers. Currently, the CBOE market volatility index is up 6.46% at 11.04, with a sharp rise since Monday, 19 June, owing to oil price concerns. The index has a 1-year change of -39.90%, indicating a sharp drop in negative sentiment since the oil price concerns and Brexit issue hit the global markets.

Even the fear and greed index of CNNMoney is sharply lower and considered neutral. In the United States, much of the bearish sentiment that is pervasive throughout markets is based on political mudslinging more than it is on economic weakness. While everyone is decrying Trump Trade, the US president has yet to push through major legislation to make good on his election promises. If tax law reform and a health care overhaul are enacted, the US economy may receive a much-needed bolus of adrenaline that investors are so eagerly awaiting.

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Chee Hin Teh 3 years ago Member's comment