Sterling under pressure as Brexit uncertainties rise
The euro was relatively unchanged in the Asian session. Today, investors will receive important CPI data from the European Union. The German statistics office will release the CPI data for the month of July. The headline CPI is expected to remain unchanged at 1.7%. On a MoM basis, the CPI is expected to remain unchanged at 0.5%. The HICP data is expected to remain unchanged while the wholesale prices are expected to rise slightly to 0.2%. The ZEW economic sentiment for August is expected to decline by -27.8. In Spain, the headline CPI is expected to remain unchanged at 0.5%. In recent months, data from the EU has been relatively weak, which is a signal that the ECB will likely intervene. The question is whether any intervention will be enough.
Sterling remains under pressure as investors keep a close eye on Brexit developments. The biggest concern is whether the UK will leave without a deal. In recent statements, Boris Johnson has insisted that the country will leave on October 31st, with or without a deal. He has also asked the residents to prepare for a no-deal Brexit. Regarding negotiations, he has told the EU to renegotiate the deal that was passed by Theresa May. This is a position that the EU has rejected. At the same time, the House of Commons, which has repeatedly failed to pass any meaningful legislation on Brexit is looking at ways of preventing a no-deal Brexit. Meanwhile, the UK will release employment data for the month of July. The unemployment rate is expected to remain unchanged at 3.8% while the claimant count is expected to increase by 32k. The average earnings are expected to rise by 3.8% (ex-bonus) and 3.7% (+ bonus).
The biggest data release today will be the CPI numbers from the United States. Investors expect the headline CPI for July to have remained unchanged at 1.7%. On a MoM basis, the CPI is expected to increase slightly from 0.1% to 0.3%. The core CPI, is expected to remain unchanged at 2.1%. On a MoM basis, the core CPI is expected to increase by 0.2%, lower than the 0.3% increase in June. These numbers come as investors try to think about what the Fed could do next after slashing rates last week.
The EUR/USD pair rose sharply in the American session. It reached a high of 1.1230. In the Asian session, the pair moved slightly lower as investors wait for important data from Europe and the US. As of this writing, the pair is trading at 1.1207. On the hourly chart below, this price is along the middle line of the Bollinger Bands. It is also in the middle of the recent channel of 1.1162 and 1.1250. The RSI remains at the neutral level of 50. The pair will likely see major movements today and will likely move past the 1.1162 and 1.1250 channel.
The GBP/USD pair is trading at 1.2017, which is slightly higher than the recent low level of 1.2013. The latter was the lowest level since 2017. On the hourly chart, the price is along the 25-day and 14-day moving averages. As a result of the consolidation, the RSI remains at the neutral level of 52 while the ADX is trading at 24. There is a likelihood that the pair will resume the downward trend, to retest the previous support of 1.2013.
The price of gold pushed higher in the Asian session. The pair is now trading at 1516, which is close to the highest level in history. On the daily chart below, the pair’s price is above all the short, medium, and long-term moving averages. The RSI has moved to the overbought level while the accumulation/distribution indicator is rising. The pair will likely continue moving higher as traders focus on the Fed and the easing of the global economy.