Sterling rises to 6-week high after positive statements by Johnson

Sterling rose to a six-week high against the euro and the dollar after the UK released the GDP numbers for July and the second quarter. In July, the economy expanded by 0.3% after remaining unchanged in June. On a QoQ basis, the economy was unchanged. This was better than the expected contraction of -0.1%. Meanwhile, industrial production increased by 0.1%, which was better than the expected decline of -0.1%. Manufacturing production increased by 0.3% after declining by -0.2% in June. The trade deficit was £9.14 billion, which was lower than the expected £9.6 billion. Meanwhile, investors reacted to a meeting between Boris Johnson and Leo Varadkar in Dublin. After the meeting, Johnson said he wanted to have a deal with the EU before October 31. 

Global stocks were mixed today after data from China showed the impacts of the trade war. Yesterday, data from the country showed that the country’s exports in August declined by 1% while imports declined by 5.6%. in the month, exports to the United States declined by 14% while imports from the country declined by 22% to $10.3 billion. Analysts believe that the weakness in the Chinese economy is weaker than what the Chinese data show. This data came after the country’s central bank injected $126 billion into the country’s financial system to help spur borrowing. The data also show that the increasing pressure could push the two governments to the negotiating table. The two countries will meet in the coming month to try and restart the talks. Still, there is limited political will from both sides. Trump believes that his strong stand against China will help him win the election while Xi sees no political gain of caving to US demands.

The Japanese yen weakened against the USD after the country released mixed economic data. In the second quarter, the country’s GDP expanded by 1.3%, which was in line with expectations but lower than the first quarter’s growth rate of 1.8%. On a QoQ basis, the economy expanded by 0.3%, which was lower than the previous 0.4%. The GDP capital expenditure increased by just 0.2% after rising by 1.5% in the first quarter. The GDP price index rose by 0.4%, which was lower than the previous 0.1%. The Japanese economy is going through a rough patch as a result of the trade war between China and US. It is also being affected by the mini trade war between the country and South Korea.

GBP/USD

The GBP/USD pair rose sharply today following positive economic data and statements from the UK. The pair rose to a high of 1.2385, which is the highest level in 6 months. It is now trading at 1.2358, which is above the 21-day and 7-day moving averages. The RSI has climbed to above the overbought level while the pair is trading along the upper line of the Bollinger Bands. While the pair could continue moving upwards, there is a likelihood that volatility could increase as the Brexit crisis continues.

EUR/USD

The EUR/USD pair was relatively unchanged as traders waited for a statement by the ECB later this week. The ECB is expected to deliver its interest rates decision and a possible stimulus on Thursday this week. The pair is trading at 1.1030, which is slightly lower than the intraday high of 1.1040. On the 30-minute chart, this price is along the 28-day and 14-day moving averages. The RSI is at the neutral level of 54. At this stage, the pair will likely breakout in either direction.

GBP/CHF

The GBP/CHF pair rose sharply as investors cheered the UK economic data. The pair reached an intraday high of 1.2277, which was the highest level since July 27. On the hourly chart, the pair is on a strong upward trend. The pair is trading above the 14-day and 28-day moving averages while the RSI is above the overbought level of 70. The pair will likely continue moving higher to complete the cup and handle pattern that is forming.