Sterling declines as UK posts slowest growth in six years
The sterling declined after data from the United Kingdom showed continued weakness in the economy. The second reading of the fourth quarter’s GDP showed that the economy expanded by 1.3%, which was lower than the expected 1.4%. It was also lower than the first reading of 1.6%. On a QoQ basis, the economy expanded by 0.2%, which was lower than the expected 0.3%. Business investments contracted by an annualized rate of 3.7%, which was lower than the expected contraction of 3% in the fourth quarter. Industrial production declined by -0.9% in December while the manufacturing production declined by -0.7%.
The Swiss franc had a flash crash today before reversing against the USD and the euro. Within a second, the currency had fallen by a percentage point against the two currencies before returning to previous levels. According to the Financial Times, the reason for the sudden movement was caused by a ‘badly executed trade, which was exacerbated by thinner-than-usual liquidity because of the holiday in Tokyo.’ Earlier on, Switzerland had released CPI data that were weaker than expected. The CPI in January rose by an annualized rate of 0.6%. On a MoM basis, the CPI contracted by -0.3%.
Global stocks moved up today as traders started to focus on the ongoing trade talks between the United States and China. A number of officials from the United States are currently in China, where they hope to come up with a deal that is acceptable between the two countries. Last week, Trump spooked investors when he said that he would not meet with Xi Jinping before the March 1 deadline. That was interpreted to mean that a deal was unlikely to happen.
The GBP/USD pair dropped today after the weaker-than-expected economic numbers. The pair is now trading at 1.2900, which is close to Friday’s low of 1.2850. On the four-hour chart, the 28-day EMA is on the outside side of the 14-day EMA, which is a sign that more downward movements could happen. This is confirmed by the RSI, which remains at the 35 level. There is a likelihood that the pair will test the important 50% Fibonacci Retracement level of 1.2820.
The euro was little moved today as traders waited for progress on trade talks. The pair is now trading at 1.1310, which is slightly higher than Friday’s low of 1.1296. The current slight upward movement could be because the pair is nearing the important support of 1.1290 as shown in the chart below. After weeks of sharp declines, there is a likelihood that the pair will continue moving up to the 1.1340 level, which is also the 23.6% Fibonacci Retracement level.
The USD/CHF pair had a flash crash that saw the pair reach an intraday high of 1.0095. The pair then moved lower to the previous levels of 0.9995. The pair then started moving up and reached a high of 1.0040. The pair has been moving up since January 10, when it reached a low of 0.9715. The current price is above the 14-day and 28-day EMA as the RSI has moved closer to the overbought level of 70. The pair will likely continue the upward trend until it reaches today’s high of 1.0095.