Sterling drops after Barnier no-deal Brexit warning

Sterling was little changed as traders waited for the next steps on Brexit. Yesterday, parliament failed to pass any of the four tabled indicative votes and there is a high possibility that they will reject Theresa May’s deal again. This exposes the country to the risk of a no-deal Brexit. In a statement today, Michael Barnier, who is the lead EU negotiator said that the risks of a no-deal Brexit were increasing. He also said that the EU was willing to work with the UK to find a common ground that works for the two sides. Today, the construction PMI remained unchanged at 49.7, which was slightly lower than the 49.8 that traders were expecting.

After dropping sharply in the morning hours, the Australian dollar stabilized in the afternoon session. The currency had reacted to the relatively dovish statement from the Reserve Bank of Australia (RBA). In the statement, the bank expressed concerns about the slowing global and domestic growth. It now expects inflation to rise by 2.0% this year and 2.1% in the coming year. The dovish tone of the bank is in line with what the other central banks have been doing. Tomorrow, traders will receive retail sales and trade data from the country.

The Swiss Franc weakened against the USD after the release of inflation numbers from Switzerland. The numbers showed that the CPI rose at an annualized rate of 0.7%, which was higher than the expected 0.6%. On a monthly basis, the CPI rose by 0.5%, which was lower than the expected 0.4%. Still, this inflation is much lower than the 2% target from the SNB. Meanwhile, in the EU, the PPI rose by 3.0%, which was higher than the previous 2.9% and lower than the consensus estimates of 3.1%.

In the United States, more signs that the economy is softening emerged today. The core durable goods orders for February rose by 0.1%, which was below the expected 0.3% target. The headline durable goods orders contracted by minus 1.6%, which was lower than the expected -1.1% decline. In January, the orders had risen by 0.1%. The durables (ex-defense) declined by minus 1.9%, which was lower than the expected gain of 0.1%.

USD/CHF

The USD/CHF pair started an upward trend on March 20, when it traded at 0.9895. Today, the pair reached a high of 0.9999, which is one pip below parity. The pair is now trading slightly lower than the high. This level is between the 38.2% and 50% Fibonacci Retracement level. It is also above the Tenkan-Sen line of the Ichimoku Kinko Hyo. The signal line of the Stochastic indicator is slightly below the overbought line. The pair will likely continue moving upwards to test the parity level.

GBP/USD

The GBP/USD pair declined today as more warnings of a no-deal Brexit came. The pair is now trading at 1.3020, which is closer to Friday’s low of 1.2977. On the four-hour chart, the pair is slightly above the important support of 1.2960. The pair’s price is slightly above the lower band of the Bollinger Bands while the Average True Range (ATR) indicator has been moving upwards. There is a likelihood that the pair will continue moving downwards.

EUR/USD

The EUR/USD pair continued the downward trend and reached a low of 1.1188. On the four-hour chart, the current price is lower than the 100-day and 50-day moving averages. The RSI has remained slightly above the oversold level of 30 while the ADX has stabilized above the 30 level. The pair will likely continue declining until it tests the important support of 1.1175.