STERLING DROPS AS TERESA MAY FACES A CONFIDENCE VOTE
The yen was unchanged even after the European Union parliament agreed on a deal with Japan. The ‘cars for cheese’ agreement will see Japan scrap many of the tariffs it places on goods from the European Union. These goods include cheese, wine and meat. In return, the EU will remove tariffs it currently places on Japanese cars and parts. In a statement, Cecilia Malmström, the EU trade commissioner said that the deal creates a win-win model in trade negotiations. She also said that negotiators were motivated by Trump’s statement that ‘trade wars are good and easy to win.’ In total, this deal will affect more than 600 million residents of Japan and the EU.
The crude oil prices rose slightly today after data from API showed reduced inventories. The inventory data showed that inventory contracted by more than 10 million barrels. This was the sharpest decrease since January this year. Later today, the EIA will release its inventory data and traders expect a contraction of more than 2 million barrels. In a report released today, OPEC announced that demand for its oil will reduce in the coming year as US shale fields continues to do well. In the year, the world will need 31.4 million barrels of oil per day, which is 2.1 million barrels lower from this year’s demand.
The sterling declined today as investors waited patiently for the results of the vote of no confidence against the prime minister. The results will be known by 21:00 (GMT). In the vote, the 315 Tory MPs will write down whether they have confidence in the prime minister or not and putting the paper in a metal box. This came after the chairman of the backbench received 48 letters in support of the vote. The current crisis comes as Theresa May continues to negotiate on a better Brexit proposal acceptable to the UK and the EU.
In the United States, inflation numbers released by the BLS were mixed. The closely-watched CPI was at 2.2%, which was in line with expectations but lower than October’s 2.5%. On a MoM basis, the growth of 0.2% was unchanged. The headline CPI was at 2.2%, lower from the previous 2.5% but in line with expectations. Real earnings dropped by minus 0.1%, which was lower than the estimated 0.3% growth.
The CHF/JPY pair declined today to an intraday low of 113.78. This was the lowest level since Monday this week. The pair then rose to an intraday high of 114.05, which is slightly above the 61.8% Fibonacci Retracement level. This price is lower than the 25-day and 50-day EMA while the Relative Strength Index (RSI) is currently at 41. The pair will likely resume the downward trend and test the 38.2% Fibonacci Retracement level of 113.56. However, this will depend on the monetary policy statement from the SNB tomorrow.
The GBP/USD pair dropped sharply as traders followed the happenings in the UK parliament. The pair reached an intraday low of 1.2475, which is the lowest level in more than 20 weeks. A successful vote of no confidence will put the country in turmoil because the new leader will have to renegotiate a deal within less than three months. The current price is below the 25-day and 50-day EMA. The RSI, momentum and the MACD all show that the downward momentum could continue.
The EUR/USD pair rose today after the CPI numbers from the US. It reached an intraday high of 1.1365, which was the highest level since yesterday. As of writing, the pair was trading at 1.1350, which is along the 50-day EMA level but higher than the 25-day EMA. The pair’s RSI is at 58 and climbing, which is an indication that the price could continue moving up. However, as the ATR indicator shows, the pair could continue seeing big up and down swings.