EURO FALLS AS ECONOMIC SENTIMENT DISAPPOINTS
The euro fell today after disappointing data from the European Union. The closely-followed German ZEW Economic Sentiment for July came in at negative 24.7 which was lower than the expected negative 18.0. This is an important number that gauges the economic sentiment for the next six months. It has been in negative territory since March and has been dropping. For the European Union, the ZEW sentiment also dropped to negative 18.7 from last month’s negative 12.6. This is a reaction to the ongoing problems with the global trade which could intensify as Donald Trump heads to Europe for a NATO meeting.
The cable fell today as negative political news combined with negative data. Yesterday, the foreign minister, Boris Johnson announced his resignation. This followed the resignation of the Brexit minister, David Davis. The disagreement is over the Brexit deal hammered out on Friday last week. The two ministers disagreed with the issue of the customs union. Theresa May’s proposal will leave the UK inside the EU’s customs union. This is favored by large companies like Airbus and BMW. Opponents of the deal argue that a Brexit deal that leaves the UK in the EU customs union does not help the UK achieve the Brexit vision of a global Britain.
The UK’s GDP for the month of May rose to 0.3%, which was in line with expectations. On the other hand, the manufacturing production in the country rose 0.4%, which was lower than the expected 0.9%. On a yearly basis, manufacturing production rose by 1.1%, which was lower than the expected 1.9%. Industrial production rose at an annual rate of 0.8%, which was lower than April’s 1.6% and the expected 1.9%. These are signs that the country’s manufacturing industry is being affected by the uncertainties of Brexit.
The Loonie was little moved today as traders waited for the monetary policy decision from the Bank of Canada. While the officials are not expected to hike rates, traders will pay close attention to the statement and the press conference which will come later. Today, Canada extended the good news streak with the housing starts numbers. In June, housing starts rose to 248.1K, which was higher than the expected 195K. Building permits jumped by 4.7%, which was higher than the expected 1.4%.
After surging yesterday, the EUR/USD pair fell today and crossed the important support of 1.1725 as shown below. It then continued falling and is currently trading at 1.1700. The price is below the 25 and 50-day moving average and is even below the lower Bollinger Band. The MACD is also moving lower. With no major economic data from the US today, the pair could continue moving lower. If it does, traders should look out for the 1.1670 support.
The USD/CAD pair rose slightly today, ending the decline started on Friday when Canada released impressive jobs numbers. Today, housing numbers were better than expected, which is a positive sign ahead of tomorrow’s BOC decision. The pair is now trading at 1.3125, which is higher than the 25 and 50-day moving average. The RSI has fallen from the overbought territory of 70 and is currently trading at 54. As the decision nears, traders should expect the pair to resume its descent.
The GBP/USD pair made a sharp decline yesterday after the – expected – resignation of Boris Johnson. Today, the pair remained near yesterday’s lows as the negative economic data weighed down on sentiment for the pound. It has also struggled to recover the losses made yesterday. It is now trading at 1.3275, which is at the upper band of the Bollinger Bands indicator. The price is also at an important support level as shown below. At this point, if the pair moves above the line, it could attempt to reach at least yesterday’s high of 1.3360.