Sterling falls as Boris Johnson demands EU deal by December 2020

The sterling dropped today after reports that Boris Johnson will not seek an extension to the transition period. The team at Downing Street is seeking to amend the withdrawal agreement so that the transition period will end on December 31, 2020. Experts believe that 12 months is a relatively short duration for the UK and the EU to agree on trade issues. During this transition, the UK will continue being a member of the European Union. However, the government will not have any voting rights in the European Union institutions. This means that there will be some uncertainty in 2020 on the progress of these talks. Meanwhile, the Office of National Statistics (ONS) released jobs numbers for October. The unemployment rate remained unchanged at 3.8% while average earnings ex-bonuses declined from 3.6% to 3.5%. Average earnings plus bonuses declined from 3.7% to 3.5%. 

The euro rose slightly against the USD and sterling as Eurostat released the trade numbers for October. The data showed that exports of goods from the euro area to the rest of the world rose to €217.9 billion. This was a 4.1% increase compared to October 2018’s €209.3 billion. Imports declined to €189.9 billion. This was a 3.2% decline from last year’s 196 billion. This led to a €28 billion surplus in goods trade. This was higher than the €13.2 billion surplus in 2018 and the consensus estimates for this year of €17 billion. Meanwhile, Italian, French, and German car registration numbers for November were relatively weak. In Germany, car registrations dropped from 16.3% to 5.1% while in France, they dropped from 8.7% to 0.3%. In the United States, the market received important housing data. Housing starts rose by 3.2% to 1.365 million while building permits rose by 1.4% to 1.482 million.

Asian stocks rose as traders cheered the truce between the United States and China. The first phase of the deal saw China commit to unprecedented agricultural product purchases from the United States. China also committed to take more action to prevent intellectual property theft and open its market to more American companies. In Europe, stocks declined after the weak car registration data from the region. Investors also reacted to a report that Unilever would miss its sales growth target for 2019. In a statement, the company said that it would be unable to meet its 3% growth target. The market also reacted to news that Boeing, the biggest manufacturer in the United States, would halt 737 Max production. The company has been producing 40 Max planes every week and has more than 400 of them in storage. These affected top suppliers like France’s Safran and Senior, the British engineering firm. 

GBP/USD

The GBP/USD pair declined to a low of 1.3155. This was lower than Friday’s high of 1.3515. The pair managed to fill the gap that was formed on Friday as the election results were being announced. The price is along the lower lines of the Bollinger Bands while the RSI has moved to the oversold level. The momentum indicator remains below the 100 level. The pair may move lower to test 1.3100, which is an important support level.

GER30

The DAX index declined to a low of €13,272 on negative corporate news. This decline happened after the index made a double top at €13,433. The price is below the important support shown in red below. The price is also below the lower line of the Bollinger Bands while the RSI has dropped sharply. The index may drop further to €13,250 as traders receive more data.

EUR/USD

The EUR/USD pair rose slightly as traders reacted to trade data from Europe. The pair rose to a high of 1.1160. As the price moved up, it broke past the upper side of the symmetric triangle pattern. The price is a bit higher than the 14-day and 28-day moving averages. The volumes indicator is relatively lower. This implies that this could be a false breakout, which means that the price may also decline during the American session.