STERLING RISES AFTER FRESH BREXIT HOPES
After a volatile Monday, the sterling rose today after the de facto deputy prime minister said that a deal will be made within the next 24 or 48 hours. In an interview with BBC, David Lidington said that the two parties were ‘within touching distance’. In an address to her cabinet, Theresa May said that there were ‘small outstanding issues’ remaining on Brexit. The news led the sterling to rise to an intraday high of 1.2930. It rose even after the Office of National Statistics (ONS) released worse-than-expected jobs numbers. In October, the claimant count increased by 20.2K, which was higher than the consensus estimates of 4.3K. The unemployment rate increased to 4.1%. Investors were expecting the rate to remain unchanged at 4.0%. On a positive side, wages (ex-bonus) increased by 3.2%, which was higher than estimated 3.1%.
The euro rose slightly against the USD after the sentiment data from Germany showed slight improvement. The data from ZEW showed Germany’s economic sentiment at minus 24.1, which was better than the minus 24.2 that traders were expecting. While this was an improvement, the economic sentiment for the EU declined to the lowest level since September 2016. This data came a day before traders receive the first reading of the region’s GDP numbers. It also comes a week after a report by the European Commission reduced economic estimates for the region for 2018, 2019 and 2020. It also comes as Italy struggles to come up with a budget acceptable to the EU.
Crude oil resumed the downward trend after yesterday’s pause. The reason for the decline was a Trump tweet that asked the region not to reduce output, which will lead to a higher price. This comes after Trump’s reluctance to punish Saudi Arabia after the killing of journalist Khashoggi. Today, OPEC released the monthly oil report. In it, it lowered the forecast for 2019 demand. This was a sign that OPEC will likely go on with the plan to slash production. The reason for the lowering of the forecast is to prevent oversupply in 2019.
The EUR/USD pair rose today to an intraday high of 1.1266. On the hourly chart below, the 15-day EMA is attempting to cross the longer-term 30-day EMA. The RSI has moved from 19 to the current 54, which is a bullish sign. At the same time, the Bulls Power indicator is rising. Therefore, there is a likelihood that the pair will continue moving up. If it does, it will likely find resistance at the important 1.2850 level.
The GBP/USD pair rose from a low of 1.2827 to an intraday high of 1.2955 after signs of a Brexit deal emerged. On the hourly chart below, the pair’s RSI has risen from a low of 16 to the current 69. This increase is a bullish sign for the pair. The 15-day and 30-day EMA indicators have crossed over, which is another bullish sign. Therefore, the pair is likely to continue moving up. If it does, it will likely test the important resistance level of 1.3000.
Brent crude oil resumed the decline after gaining yesterday. On the daily chart below, the XBR/USD pair’s RSI has moved from 79 in October and is currently at 24. The double EMA and the momentum indicators show that the pair will likely continue declining. This trend is likely to continue as the pair tries to find a new support level. If it does, it will move to the 65 level.