US stocks jump as traders bank on PBOC easing
Sterling started the year on a down note. The currency lost about 40 basis points against the USD after rallying by more than 1.1% in December. Traders have started worrying about the prospects of the UK as Boris Johnson starts negotiating a large trade deal with the European Union. The biggest concern is whether the prime minister will be able to have a deal confirmed by the end of this year. Earlier today, data from Markit showed that the country’s manufacturing activity eased in December. The PMI eased to 47.5 from the previous 48.9.
The euro declined against the USD even as data showed that the region was recovering. Manufacturing data by Markit showed that the PMI increased to 43.7 to December. This was higher than the previous 43.4. In France, the PMI increased to 50.4 from the previous 50.3. In Spain, the PMI dropped from 47.5 to 47.4. However, this was slightly higher than the consensus estimates of 47.0. Manufacturing activity in other European countries like Sweden, Norway, and Poland also rose in December.
The US dollar index and US futures rose slightly today as the market waited the important FOMC minutes. Futures tied to the Dow and S&P rose by 150 and 20 points respectively. The minutes are expected to be released later today. In the past meeting, the bank left rates unchanged and pointed that rates will remain unchanged in 2020. In addition, the market is optimistic that the world economy will recover this year. This is because the risks the market faced last year have eased. The US has made a trade deal with China while the impasse in the British parliament has ended. Also, the PBOC said that it would provide monetary easing this year to spur growth.
The EUR/USD pair declined to an intraday low of 1.1185. This was the lowest level since December 31. It is also lower than last week’s high of 1.1240. The price is below the 14-day and 28-day moving averages. The two averages have made a bearish crossover. The pair is also headed towards the 38.2% Fibonacci Retracement level. The RSI, which has been moving lower, has declined from a high of 89 to 34. The pair may continue moving lower.
The GBP/USD pair declined today. The pair moved from a high of 1.3285 to a low of 1.3195. The price is slightly below the short and medium-term moving averages. It is also approaching the Ichimoku cloud, which has been rising. The pair is on an upward trend on the hourly chart. There is a likelihood that it will test the important support of 1.3270 and then resume moving upwards.
The AUD/USD pair declined to a low of 0.6982. This happened as PMI data from China disappointed. The data by Caixin showed that the manufacturing PMI declined from 51.8 to 51.3. The price is along the lower line of the Bollinger Bands while the RSI has been declining. The momentum indicator has also been falling. The pair may continue moving lower to test the important support of 0.6950.