Sterling rises after parliament suspension decision is taken to court
The euro declined today against the USD after a series of mixed economic data from the region. In France, data showed that the economy expanded by 0.3% in the first quarter. This was slightly higher than the consensus estimates of 0.2%. In Spain, the CPI rose by an annualized rate of 0.3%, which was below the expected 0.4% and lower than the previous 0.5%. In Germany, the unemployment rate remained unchanged at 5.0%. In the European Union, business and consumer survey rose to 103.1 from the previous 102.7. These numbers continue to show that the European Union is going through a challenging period with many experts expecting it to go through a recession soon.
The sterling rose today as investors continued to deliberate on the decision by Boris Johnson to suspend parliament. In doing so, the prime minister is risking the likelihood of having a no-deal Brexit on October 31. In a statement, the chief EU negotiator seemed to accept that a no-deal Brexit is a possibility. Part of the reason why the sterling rose is that lawyers for the Scottish National party asked the court to block the suspension of parliament. The hope is that the court could remove the suspension and let the members debate. The parliament will likely vote to block a no-deal Brexit.
In the United States, the Bureau of Economic Analysis released the important GDP data for the second quarter. The data showed that the economy expanded by 2.0%, which was slightly lower than the previously-released 2.1%. The GDP price index remained unchanged at 2.5% while the goods trade deficit narrowed slightly down to $72.34 billion in July from the previous $74.16 billion. Corporate profits rose by 5.1% while the real consumer spending in the second quarter rose by 4.7%. In the past week, the initial jobless claims rose by 215k while the continuing jobless claims increased to 1698k.
The EUR/USD pair declined to a low of 1.1068, which was the lowest level since last Friday. The pair is now trading at 1.1075, which is slightly below the 14-day and 28-day moving averages. The RSI is currently at 41. Now that the US GDP data did not have an effect on the pair, there is a likelihood that the pair will continue trading in this holding pattern.
The GBP/USD pair rose slightly to a high of 1.2230. On the hourly chart, the pair’s current price is slightly higher than yesterday’s low of 1.2255. It is also along the middle line of the Bollinger Bands. The money flow index has risen to the current level of 50. It is also slightly lower than the 61.8% Fibonacci Retracement level. While the pair could move in either direction, it will likely move lower, to test the 50% Fibonacci level at 1.2155.
After declining in the morning session, the pair pared some of those losses and is currently trading at 59.75. This is after reaching a low of 59.26. On the hourly chart below, the current price is along the middle line of the Bollinger Bands. The price is along the 14-day moving averages and slightly above the 28-day moving averages. The pair will likely remain along these levels in the US session unless some major news release moves the market.