Sterling jumps as Boris Johnson pledges corporate tax cuts
Sterling rose as the campaign period continued. Focus today was on Boris Johnson, who delivered a speech to the Confederation of British Industry (CBI). In the speech, the prime minister pledged to deliver Brexit on time and introduced a fresh round of tax cuts. He also pledged to increase employment allowance from 3,000 to 4,000 and increase the structures and buildings allowance from 2% to 3%. Recent polls show that Johnson will beat Labour’s Jeremy Corbyn. A recent poll by Survation said that three times as many people in Britain would prefer Johnson than Corbyn. Conservatives are also leading in polls against the liberals.
The euro was relatively unchanged as the markets reacted to the ECB’s financial stability review. This is a report that is released twice a year and is aimed at addressing the underlying fundamentals in the financial market. The report today warned that the euro area should brace for a tough period in the next few months. In recent months, data from Europe has shown increased weakness. This weakness has been attributed to risks presented by Brexit, over-regulation, and the ongoing trade war between the US and China. The market has also been wary about trade friction between the EU and the United States. Just today, Volkswagen, the biggest automaker in the region slashed its medium-term outlook.
US and China futures rose today as the market reacted to the improving sentiment on trade. On Friday, Larry Kudlow, the Chief Economic Advisor for Donald Trump said that the US and China were continuing talks. This was confirmed by a report by Chinese state media. In a tweet on Sunday, Donald Trump also echoed his previous statements on the optimism of a deal. A deal between the US and China would bring some stability in the market and reduce the cost of doing business for American and global trade. In addition, the market is reacting on news that Congress will approve of Trump’s USMCA deal.
EUR/USD pair stabilized today as the market reacted to the release of the Financial Stability Review. The pair is trading at 1.1060, which is along the 38.2% Fibonacci Retracement level on the hourly chart. The pair is trading along the 14-day moving averages and slightly above the 28-day moving averages. The pair appears to have found significant resistance at the current levels. The RSI has moved slightly below the overbought level of 76.30 to the current 62.
GBP/USD pair rose to a high of 1.2984 after Johnson promised a new round of tax cuts. This was the highest level since August 22 this year. The pair then eased slightly and is now trading at 1.2947. This price is slightly above the 14-day and 28-day moving averages while the RSI has dropped from 79 to below 67. The price may drop after the pair hit major support.
The USD/JPY pair rose to an intraday high of 109.05 as global risks on trade declined. The price is above the 61.8% Fibonacci Retracement level on the hourly chart. The price is trading above the 14-day and 28-day moving averages. The RSI has moved above the overbought level of 70 while the average true range has been in freefall. The pair may continue to move upwards ahead of Japanese trade data on Wednesday.