Sterling falls as Boris Johnson releases his Brexit plan
Global stocks declined today as investors reacted to the weak manufacturing numbers from the United States. Yesterday, data showed that the manufacturing PMI had declined to a low of 47.8. This was the lowest level since the financial crisis of 2008/9. It was the second straight month of declines. The decline of the manufacturing activity is attributed to the trade war that is going on. On his part, Trump blamed Jerome Powell and the expensive dollar for the surge. According to JP Morgan, the global manufacturing PMI has declined to 49.5.
The sterling declined today as Boris Johnson outlined his strategy on Brexit. In his speech, Johnson said that his proposal will ensure that there are no checks at or near the border with Northern Ireland. He also said that the UK would respect the peace process and the GFA. Further, he said that he would promote a process of renewable democratic consent by the executive and assembly of North Ireland. He also said that he would propose a complete withdrawal of the UK from the EU and create a new trade policy. The deal will likely be rejected by Brussels, which has insisted on some form of a backstop. It will also not be passed by the divided parliament.
The US dollar was relatively unchanged after ADP released the jobs numbers for September. The ADP nonfarm payrolls rose by 135k. This was lower than the estimated 140k. This number came a day after ISM released weak manufacturing numbers. They also came two days before the Labour Department is expected to release the official employment numbers. In most months, the ADP data tends to differ from the official data from the Labour department.
The GBP/USD pair declined to a low of 1.2225. On the hourly chart, this price is slightly higher than yesterday’s low of 1.2200. It is also slightly lower than the middle line of the Bollinger Bands while the RSI has moved slightly higher. The price is also slightly lower than the 23.6% Fibonacci Retracement level. The pair will likely remain along the current channel of between 1.2200 and 1.2325.
The FTSE 100 index declined sharply today. In the past two days, the index has declined from a high of £7450 to today’s low of £7205. On the hourly chart, the index is trading along the lower line of the Bollinger Bands. The pair is also trading below all the moving averages while the RSI has dropped to the oversold level of 15. While the index could continue moving lower, there is always a possibility of it moving slightly higher.
The EUR/USD pair rose slightly after ADP released its employment data. The pair rose to a high of 1.0935. On the hourly chart, the pair is trading above the resistance level shown below. This price is along the middle line of the Bollinger Bands. The current price is slightly lower than the 23.6% Fibonacci Retracement level. The two lines of the Relative Vigor Index are below the neutral line. The pair will likely continue consolidating as traders wait for the official jobs data on Friday.