Sterling gains after Theresa May announces her resignation
Sterling rose today after Theresa May announced her plan to resign as Conservative leader. The move opens way for a new party leader and the country’s prime minister. The new leader will have the mandate of uniting the fractured party and delivering Brexit. This will be a tall order for the prime minister because of the divisions within the party and the low chances of bringing Jeremy Corbyn on board. In a statement at Downing Street, May said that she would resign as leader on June 7. Meanwhile, data from ONS showed that retail sales rose by 5.2% in April while the core retail sales rose by 4.9% . This was much higher than the expected 4.6% and 4.2%.
In the US, futures pointed to a higher open after Donald Trump signaled flexibility on Huawei. When unveiling a $16 billion bailout to the farmers, the president said that Huawei could be part of a trade deal with China. Investors also expect Trump and Xi to find a compromise in their meeting in June. Meanwhile, the US announced fresh warning to China about manipulating its currency to offset the damage caused by the tariffs. In a notice by the Commerce Department, the US will punish countries that ‘act to undervalue their currency relative to the dollar, resulting in a subsidy to their exports’.
The USD eased slightly after the US released weak durable goods data. Data from the Census bureau showed that in April, the durable goods orders declined by -2.1%, which was lower than the expected decline of -2.0%. This is after it grew by 1.7% in March. The goods orders non-defense excluding air declined by -0.9%, which as lower than the expected decline of -0.3%. The closely followed core durable goods order was unchanged in the month.
After days of declines, the GBP/USD rose today to a high of 1.2716. This was significantly higher than yesterday’s low of 1.2605. On the four-hour chart, the price is slightly lower than the upper line of the Bollinger Bands and much lower than the 50-day moving average. The Bulls Power has also started rising. There is a likelihood that the sterling will gain as the Conservatives elect their new leader. If it does, it will likely test the important resistance level of 1.2860.
After a week of sharp declines, the XBR/USD pair rose today on optimism on trade. The pair rose from a low of 65.95 and reached a high of 67.65. On the hourly chart, the price is along the 23.6% Fibonacci Retracement level and the 25-day moving averages. The 50-day moving averages is along the 38.2% Fibonacci Retracement level. Therefore, there is a likelihood that the pair will move higher to test the important support of 68.50.
The EUR/USD continued the gains started yesterday. Today, the pair reached a high of 1.1205 after the weak durable goods orders from the US. On the hourly chart, the price is above the key support shown below. It is also above the 50% Fibonacci Retracement level, above the 50-day and 25-day moving averages and along the upper line of the Bollinger Bands. The pair will likely continue moving higher in the US session. However, things could change on Monday depending on events that will happen over the weekend.