Doubts on whether British parliament will pass new deal rise
Sterling rose today after Boris Johnson announced that the UK and EU had reached a deal on Brexit. This announcement came shortly before the start of an EU leader’s summit in Brussels. It’s a major step forward for Johnson, who was required to have a deal before October 19. The tough part will be for Johnson to sell the deal to the British parliament. Already, the DUP members he has been talking to have said they won’t support it as it stands. Labour leader Jeremy Corbyn said that this deal was worse than the one suggested by Theresa May. The deal under consideration states that following Brexit, Northern Ireland would apply EU customs and tariffs. These will be overseen by the European Court of Justice. There will be no customs checks in Northern Ireland. Instead, goods will be checked in the UK. Meanwhile, in September, retail sales rose by 3.1%. This was below the consensus estimates of 3.2%.
The Australian dollar rose sharply today in reaction to the EU and UK deal. Earlier today, the country released the September employment numbers. The unemployment rate declined slightly to 5.2% while full employment rose to 26.2k. This was higher than the previous decline of 15.5k. This number measures part time and full-time jobs created in the country. Participation rate declined slightly to 66.1% from the previous 66.2%.
Data from the US showed that building permits declined by -2.7% in September. This was better than the expected decline of -26.0% but worse than the previous jump of 7.7%. In total, building permits declined from 1.425M to 1.387M. Housing starts declined by -9.4% after rising by 15.1% in the previous month. Initial jobless claims declined by 214k while continuing claims increased to 1.679k. Meanwhile, the closely-followed Philadelphia Fed manufacturing index declined to 5.6 from the previous 12.0.
The EUR/USD pair rose today after the deal between the European Union and United Kingdom. It is now trading at 1.1113, which is slightly lower than the intraday high of 1.1140. On the daily chart, the 14-day and 28-day moving averages have made a bullish crossover. The RSI has also been moving higher and has reached a high of 65. The same is true with the momentum indicator. Potential scenarios for the pair will be a continuation of the upward rally or a downward trend that will see it test the previous low of 1.1000.
The GBP/USD pair rose today, continuing a rally that started in late August. The pair reached a high of 1.2985. It then declined slightly and is now trading at 1.2770 as traders lowered the likelihood of the EU-UK deal passing parliament. On the daily chart, it is trading slightly below the 61.8% Fibonacci Retracement level. It is above the 14-day and 28-day moving averages while the RSI is close to the overbought level. There is a possibility that the pair will continue being volatile as evidenced by the ATR, which has been moving higher.
The AUD/USD pair rose sharply to a high of 0.6833. This was the highest level since mid September. On the four-hour chart, this price is above the 14-day and 28-day exponential moving averages. The RSI and momentum indicator shot up while the ADX indicator declined. The pair may move higher to test the important resistance level of 0.6850. Still, this could change during the Asian session tomorrow as China releases its GDP numbers for the third quarter.