Sterling volatile as Theresa May suffers major setback
Sterling was volatile in overnight trading as the UK parliament rejected Theresa May’s Brexit deal by a wider margin than earlier expected. The bill was rejected by 432 to 202, which was the biggest loss by a UK government. In response to the deal, the Prime Minister ignored calls to resign but will face a vote of no confidence later today. She is expected to survive this vote. Still, the country will remain in uncharted territory as the March deadline nears. Later today, traders will receive inflation numbers from the UK.
The price of crude oil rose in overnight trading as investors gained confidence in global growth. This came after China announced plans to stimulate growth by offering a large stimulus package and cutting taxes. Today, the PBOC injected more than $84 billion into the economy after data from the country showed a period of sustained weakness. Data revealed that its exports had declined in December. Previously, data showed a decline in the manufacturing sector. Today, data from the housing sector showed that house prices slowed down in December after a three-month rally.
The Japanese yen was little moved today after mixed economic data from the country. On a positive note, the country’s core machinery orders rose by an annualized rate of 0.8% in November. This was better than the expected 0.4% but still lower than the previously reported 4.5%. On a MoM basis, the orders were unchanged. On a negative note, the PPI rose by an annualized rate of 1.5%, which was weaker than the expected 1.8%. While these are lagging numbers, they continue to make a case that the Japanese economy is softening.
The price of Brent rose to a high of $60.89. This was higher than yesterday’s low of $58.97. On the hourly chart, the price is above the 42-day and 21-day EMA while the RSI has moved from below 30 to the current 59. The same is true with the MACD, which is currently above the signal line. There is a likelihood that the pair will continue moving higher and if it does, it will likely test the previous high of 62.45.
The EUR/USD pair rose slightly in overnight trading and reached a high of 1.1416. This was after the sharp decline experienced yesterday when the Brexit vote was going on. The current price of 1.1407 is below the 21-day and 42-day EMA while the RSI has moved closer to the oversold level of 30 while the On Balance Volume (OBV) has eased a bit from this week’s high. The pair will likely remain a bit volatile today as traders digest the news on Brexit.
The GBP/USD pair pared earlier losses after the British parliament rejected Theresa May’s proposal by a wider margin. This is because the market had already priced in the defeat. As a result, the pair rose from 1.2667 to a high of 1.2890. As it rose, the Average True Range indicator declined sharply while the Money Flow Index rose sharply. Today, the pair will likely decline as the UK continues to face an uncertain future.