Sterling rises as Brexit confusion continues
It was a sea of green in the world stock market as investors cheered a potential trade deal between the United States and China. A report by the Financial Times said that the two countries had sorted out most outstanding issues. In the UK, the FTSE 100 rose by 11 points while in France and Germany, the CAC and DAX rose by 35 and 150 points respectively. In Japan, the Nikkei gained by 207 points while in China, the benchmark Shanghai Composite rose by 40 points. In the United States, futures pointed to a 0.5% jump by the S&P 500.
In the United Kingdom, confusion continued following yesterday’s speech by Theresa May. In the speech, which came after her meeting with the cabinet yesterday, she asked the European Union for another extension on Article 50. She argued that this delay would give the government an opportunity to work with Labor’s Jeremy Corbyn. This move infuriated Tory members, who believe that the negotiations will lead to a softer Brexit. A soft Brexit will leave the UK in the customs union with the EU. She said that she hoped an agreement will be made before next week’s emergency meeting with EU heads of government.
In the United States, data from ADP showed that the economy was indeed softening. In March, the economy created more than 129K jobs, which was lower than the consensus estimate of 184K. It was also lower than the previous month’s reading of more than 197K jobs. This number was released two days ahead of the official government numbers. Investors expect the official data to show that the economy created more than 180K jobs in March after creating just 20K in February. Later today, ISM will release the non-manufacturing PMI data.
Almost two weeks ago, the EUR/USD pair started declining from a high of 1.4850. Yesterday, it reached a low of 1.1180. Today, it has been moving upwards, reaching a high of 1.1255. On the hourly chart below, the pair is now 1.1240. The price is slightly below the upper line of the Bollinger Bands. The Relative Vigor Index has started moving downwards, with the signal line crossing the RVI line. The pair could continue the upward trend to test the 38.2% Fibonacci Retracement level at 1.1286.
The GBP/USD pair rose to an intraday high of 1.3195. On the four-hour chart, the pair has been volatile as evidenced by the Average True Range (ATR) indicator as shown below. It is now trading at the 1.3170 level. This price is along the upper line of the Bollinger Bands while the signal line of MACD indicator has turned positive. The pair will likely continue being volatile as traders continue to wait for key developments on Brexit.
On March 25, the USD/JPY pair started moving in an upward trend. Since then, the pair has jumped from a low of 109.70 to a high of 111.57. On the hourly chart, the pair is a few pips to completing a cup pattern. The price is also above the 14-day and 21-day Variable Index Dynamic Averages. The signal line of the MACD is above the neutral level. The pair will likely continue moving upwards to test the important support of 111.90.