Sterling falls as talks between EU and UK break down
European stocks and American futures rose today after China offered a reset on trade talks before the official meetings. In a statement, the Chinese government extended their offer to buy more American farm products like soybeans and corn. According to Financial Times, Liu He, the chief Chinese negotiators will be coming with real offers to help ease the ongoing trade war. This is as both sides aim to avoid upcoming tariffs. There is evidence to suggest that the trade war has been harmful to both sides. Last week, manufacturing PMI data released from the US showed that it declined to the lowest level in ten years. Also, jobs numbers released on Friday showed that the labour market was easing. This could force Trump to do a deal with the Chinese as he hopes to win the next election.
The sterling pared back gains after talks between the UK and the EU broke down. This is after the UK prime minister demanded more intense negotiations on the proposals he had made. Discussions between the two parties were held almost every day after Johnson and Jean-Claude Juncker met at Luxembourg. The decision to halt talks came a day after Downing Street accused Angela Merkel of wielding a veto on the UK leaving the customs union. Later today, Juncker and Barnier will address the EU parliament to report on the progress of things.
The price of crude oil rose today ahead of the EIA data on inventories. The numbers are expected to show that inventories rose by more than 1.41 million barrels. This will be lower than the increase in inventories in the previous week. Late yesterday, the API released its own reading of the inventories numbers. The numbers showed that the inventories rose by more than 4.1 million barrels. The API number should not be used as an indicator of what the EIA will release. This is because the two use different methodologies. Last week, the API data showed that inventories declined by 5.9 million barrels while the EIA data showed an increase of more than 3.1 million barrels.
The XBR/USD pair rose to a high of 58.50 from the day’s low of 57.11. This price is between the 23.6% and 38.2% Fibonacci Retracement level. The price is also along the upper line of the Bollinger Bands while the RSI has been moving higher. The pair will likely rise ahead of the inventories numbers. However, this could change depending on the EIA data.
The EUR/USD pair rose today to a high of 1.0990 as traders continued to focus on the upcoming trade talks. The price is currently slightly above the 50% Fibonacci Retracement level on the hourly chart. The price is also along the upper line of the Bollinger Bands and below the support line of the ascending triangle pattern. There is a possibility that the pair will continue moving higher to test the important resistance level of 1.1000.
The GBP/USD pair declined after rising to an intraday high of 1.2290. The pair has been on a strong downward trend since September 24 when it reached a high of 1.2580. The current price is below the 14-day and 28-day moving averages. It is also between the 38.2% and 50% Fibonacci Retracement level. The accumulation/distribution indicator has been on a downward trend as well. Therefore, there is a likelihood that the pair will continue declining.