Sterling slips as investors’ worries regarding growth intensify
The sterling declined sharply today as investors continued to worry about growth and Brexit. The currency declined to the lowest level since January. Investors continue to worry about Brexit and the impacts the escalating trade war will have on the economy. They are also worried on the increasing popularity of the newly formed Brexit party. The party has become so popular that it appears it may hand over the government to Labor’s Jeremy Corbyn in the next election. Investors are also concerned that the latest effort by Theresa May to bring her Brexit bill to parliament will not work. In a report released today, OECD cautioned Mark Carney against raising interest rates as the Brexit uncertainty increases.
The US dollar index rose today as traders continued to worry about trade war. The index, which measures the greenback against a basket of peer currencies, approached the highest level in two years. The gains in the dollar came as investors continued to bet on the American economy as the trade war continued to escalate. Today, the Trump administration moved to ease tensions with Huawei by providing reprieve to the company. Later today, the National Association of Realtors will release the existing home sales data. They are expected to increase by 2.7% to 5.35 million.
The Australian dollar declined sharply after the country’s central bank released the minutes of the past meeting. The minutes showed that the bank was considering lowering interest rates in the June meeting. While investors were expecting the bank to cut rates this year, they did not expect it to be this soon. In recent months, the country’s economy has been weakening, fueled by falling housing prices, prolonged drought and the weakening mining sector.
The AUD/USD pair declined sharply to a low of 0.6869, which was the lowest level since yesterday. This is close to the lowest level since December 28. On the daily chart, this price was below the 50-day and 100-day moving averages. The RSI has remained close to the oversold level of 30 while the Average True Range indicator has dropped significantly. The pair is likely to continue with this momentum if the trade war escalates.
The GBP/USD pair declined sharply to a low of 1.2685. This was the lowest level since January 18 this year. On the eight-hour chart, the price is below the 50-day and 100-day moving averages. The signal line and histogram of the MACD has continued to decline while the money flow index has remained below the oversold level of 20. The pair will likely continue declining to test the support of 1.2600.
After days of dropping, the EUR/USD pair rose slightly today to a high of 1.1160. On the hourly chart, this price is slightly above the important support of 1.1134. The pair was last at this support on May 3. On the chart, the price is slightly below the 50-day and 25-day moving averages. The commodities channel index indicator has moved from the oversold level to the neutral level of zero while the Volumes indicator has declined. The pair could resume the downward trend to test the important support of 1.1134.