Global stocks rise as trade optimism returns
The sterling continued to rally as the showdown on Brexit continued. Yesterday, Boris Johnson suffered a humiliating defeat in parliament as members of his party crossed the line and voted with the opposition. The members voted to force Johnson to ask the European Union to extend the delay of Brexit if there will be no deal before October 31. Previously, Johnson had suffered another blow as members of parliament voted to take control of Brexit. In another blow, Johnson’s brother announced that he was quitting politics as a result of “unresolved tension” between family loyalty and national interest. The only way forward will be an election but no one seems to know when it will happen. Corbyn has said that his party will not accept an election before October 31.
Global stocks rose today after the United States and China agreed to hold talks on trade. In Europe, the DAX, CAC, and Stoxx rose by 0.60%, 0.95%, and 0.70% respectively. In the US, Dow and S&P futures pointed to a higher open too. Yesterday, Steve Mnuchin, Robert Lighthizer, and Liu He confirmed that China and the US will restart talks early October. These talks will aim to solve the ongoing trade crisis that has seen the two countries put tariffs on one another. Over the weekend, the two countries ratcheted the trade rhetoric by adding tariffs on goods worth almost $200 billion. Investors are still cautious about the possibility of a deal because of the distrust between the two countries.
Today, investors received mixed economic data. In Germany, signs of further weakening in the economy were revealed as the country’s factory orders declined. In July, the orders declined by -2.7% after rising by 2.7% in June. Investors were expecting the orders to decline by -1.5%. In Switzerland, the economy expanded by an annualized rate of 0.2% in the second quarter. This was lower than the expected 0.9%.
The EUR/USD pair rose today even after relatively weak data from Europe. The pair has risen from a low of 1.0925 and has risen to a high of 1.1060. On the four-hour chart, this price is slightly above the 23.6% Fibonacci Retracement level. It is also slightly above the 14-day and 28-day moving averages. These two MAs are crossing over, which is a bullish sign. While the pair could continue moving upwards, the trend could change ahead of the official US employment numbers.
The GBP/USD pair rose sharply to an intraday high of 1.2350, which is slightly lower than the 50% Fibonacci Retracement level on the four-hour chart. This surge is a major milestone because the pair started the week at 1.1955. This price is above the 14-day and 28-day moving averages while the RSI has continued to move upwards. The RSI has moved to the overbought level. The average true range indicator has also moved further upwards, which is a signal that volatility has increased. The pair will likely continue moving upwards although this could change.
The USD/JPY pair rose today to a high of 106.72. This was the highest level it has been since August 16. This price is along the upper line of the Bollinger Bands while the RSI has moved upwards to the overbought level. The price is also slightly below the 50% Fibonacci Retracement level on the four-hour chart. The pair will likely continue moving upwards although this could change with the US jobs numbers.