MARKETS FALL AS TRADE AND CRUDE OIL CONCERNS RISE
The sterling rose today after the large sell-off that happened after the Salzburg summit that concluded on Friday. After the summit, the EU rejected the proposals put forward by Theresa May’s government. Today, Eurosceptic members of parliament appeared to support a new path to Brexit that includes taking the EU to the World Trade Organization. The approach would be similar to the EU-Canada style agreement. In the past few weeks, optimism of a deal has led the sterling to rise sharply against the US dollar. Some experts believe that the potential risks from Brexit makes being bullish on the sterling a bit difficult. Already, there are rumours of an early election to replace Theresa May in November. There is also an upcoming conservative party conference that will likely lead to volatility of the sterling.
World stocks fell today after China decided to abandon trade negotiations with the United States. The news came after the US placed sanctions on China for buying Russian military equipment. Today, the 10% tariffs on Chinese goods worth $200 billion went into effect. Germany’s DAX fell by 50 points while the Nasdaq and S&P futures pointed to a 35- and 5-point decline at the open. Stocks were also affected by crude oil prices. In a weekend meeting, OPEC leaders agreed to leave the current quota. This led the price of crude oil to jump to a four-year high of more than $81.
The euro jumped slightly against the US dollar after consumer confidence in Germany rose. The data from IFO showed that confidence rose to 103.7, which was higher than the 103.2 traders were expecting. This was however lower than confidence in August. Germany’s business expectations rose to 101.0, which was higher than the 100.2 that traders were expecting. This data measures the expectations of businesses for the next six months. The current assessment number rose to 106.4, which was higher than the expected 106.1.
The EUR/USD pair rose slightly to an intraday high of 1.1773. In recent days, the pair has been on an upward trend, rising from 1.1300 to a high of 1.1800. The high was reached on Friday last week. The current price is slightly above the 28 and 14-day moving average, with the MACD signalling more upward trend. As traders wait for the Fed decision, the pair is likely to continue moving higher.
In the past few weeks, the GBP/USD pair has been moving up, making higher highs and higher lows. It has managed to move from a low of 1.2660 to a high of 1.3298. On Friday, after completing the cup pattern, the pair had a sharp decline that saw it move to 1.3050. This was close to the 61.8% Fibonacci Retracement level. In the near-term, the pair could resume the initial upward momentum. However, as the Brexit negotiations continue, the pair will likely see some volatility.
This month, the euro has fallen against the pound, ending a major rally that started in April. It reached a monthly low of 0.8845 last week. This was close to the 50% Fibonacci Retracement level. Today, the pair fell slightly to an intraday low of 0.8933. The pair is likely to continue the upward momentum that will see it test the 0.9000 level.