CORBYN’S STATEMENT ON BREXIT PUSHES THE CABLE HIGHER
The pound rose against the dollar by up to 0.74% following this weekend’s comments by Labour Party’s leader, Jeremy Corbyn. Over the weekend, he said that he would prefer a softer landing for the UK after Brexit, where the country will maintain a closer relationship with the EU.
The statement was welcomed by the Confederation of British Industry (CBI), which released a statement today arguing that his plan would put jobs and living standards first. It was however criticized by UKIP’s Nigel Farage and Foreign Minister Boris Johnson who accused Corbyn of selling the country out. The pound rose to a high of 1.4068. Apart from the news on Brexit, the pair’s move can also be attributed to a weaker dollar as traders waited for a statement from Jerome Powell tomorrow.
The dollar fell as traders waited for tomorrow’s testimony by the new Fed governor, Jerome Powell who will address a congressional committee. The dollar’s drop was also attributed to a slide on the US treasury yields. The 10-year, 5-year, and 2-year dropped to 2.861%, 2.608%, and 2.234% respectively. On Wednesday, he will testify before the senate committee. Traders will want to hear his thoughts about the future direction of the Federal Reserve. The dollar fell by 50 bps, 14 bps, and 46 bps against the Euro, Swiss Franc, and Japanese Yen. Euro was also higher as the traders waited for the testimony by Mario Draghi before the European Parliament.
Germany’s DAX rose by almost a percentage point in line with a broad stock markets gain. The gains today were led by Deutsche Bank which announced the plan to list its asset management business. Other big gainers today were Volkswagen, Beiersdorf, BMW, and BASF. The index is now trading near the highest level since February 8.
The cable is currently trading at 1.4031 as traders digest the news about Brexit and as they wait for a statement from Jerome Powell. The current price is above the 20-day MA but lower than the 50-day MA. It is also above the significant support of 1.4007. There is a likelihood that the pair will test this support.
The DAX was higher by almost a percentage point before it shed a few basis points. It is currently trading at £12,531 near its 50-day moving average. A continued bullish move could see the index test the important resistance area of £12,650. On the other hand, a correction would see the index move below its current support of £12,505.5.
The Euro rose to a high of 1.2354 against the dollar, before losing some of the gains. It is now trading at 1.2318. The sharp movements today happened as traders waited for major economic data and news from the new Fed chair. A continued downward momentum could see the pair test the support at 1.2280 while upward momentum could see it test the weekly high of 1.2360.