Sterling pauses ahead of key parliamentary votes on Brexit
The sterling was little moved among its global peers as investors waited for a number of votes on Brexit in the house of commons. In the options market, the implied volatility of the sterling against the USD rose from 8.05 to a high of 20.85. This was the highest level since the previous vote on Brexit in the house of commons mid this month. In the parliament, traders will focus on a number of amendments, including one that will force the government to extend article 50 to the end of the year if it fails to present a Brexit proposal that passes parliament by February 26. If this amendment is passed, there is a likelihood that the sterling will continue strengthening.
The New Zealand dollar erased the earlier gains made against the USD after the country released better-than-expected trade numbers. In December, the country’s trade surplus increased to N$264 million. This was better than the expected surplus of N$225 million and better than the surplus of N$-955 million in the previous month. The surplus was caused by an increase of exports to N$5.4 billion and a reduction of imports from N$5.22 billion.
The euro eased slightly against the USD after a series of weak data from Europe. In Spain, the unemployment rate in the fourth quarter increased to 14.45%. This was higher than the expected 14.40% but lower than the previous 14.60%. In Italy, the PPI for December rose by an annualized rate of 4.1%, which was lower than the previously released 4.5%. On a MoM basis, the PPI slid by minus 0.5%. These numbers continue to show that the EU’s economy is easing, which raises concerns about the ECB’s plans to hike this year.
The GBP/USD pair was little moved as traders waited for a number of votes on Brexit in parliament. The pair remained closer to the YTD high of 1.3216. This year, the pair has moved up by more than 3% as traders wait for the way forward on Brexit. On the four-hour chart, the pair’s 20-day Commodities Channel Index (CCI) has moved from yesterday’s high of 180 to the current level of 70 while the RSI has remained unmoved closer to the 70 level. The price is also along the middle line of the Bollinger Bands. The potential points to watch for the pair will be 1.3200 or 1.3230.
The EUR/USD pair moved slightly lower after a set of weak economic numbers from Europe. The pair reached an intraday low of 1.1417, which is slightly lower than the 50% Fibonacci Retracement level on the hourly chart. The pair’s price is along the 3-week and 5-week moving averages while the ADX indicator has fallen to 32. This is an indication that the pair will likely resume the upward trend. This will likely happen if it tests the 38.2% Fibonacci Retracement level.
After rising in the morning session, the NZD/USD pair pared the gains and reached a low of 0.6838. This price was closer to the 21-day EMA and a bit higher than the 35-day EMA. On the hourly chart, the pair’s RSI has continued to remain below the overbought level of 70 while the stochastic indicator enters the oversold level. There is a likelihood that the pair will resume the upward momentum as it tries to test the previous high of 0.6880.