Sterling declines as the markets follow Brexit developments
The sterling declined slightly today as the market continued to focus on Brexit. The UK is expected to exit the European Union on January 31. This will kickstart the transition period when the UK and the EU will start deliberating on a broad trade deal. Boris Johnson has said that he wants the deal to be hammered by December 31. The EU Commission, under the leadership of Ursula von der Leyen, has said that 11 months is an extremely challenging timeline to seal a deal. The market will be paying close attention to the meeting between Johnson and other EU leaders tomorrow.
The world markets experienced an uneasy calm today as traders continued to weigh in on the growing tensions between the US and Iran. The price of gold and crude oil dropped while stocks in Europe and US futures rose. The two sides continued to issue warnings on the current situation. Yesterday, Donald Trump warned Iran that the US would respond to any retaliation. Meanwhile, the Iranian government is facing pressure from the public to retaliate against the US. According to media reports, Iran has identified 13 revenge scenarios. All this means that tensions in the region will remain.
The euro declined slightly against the USD as the markets received more positive data from the European Union. Data from Eurostat showed that retail sales increased by an MoM and annualized rate of 1.0% and 2.2% respectively. This was higher than the 1.7% increase and -0.3% decline in October. The preliminary CPI rose by an annualized rate of 1.3% in December, which was higher than the previous 1.0%. Meanwhile, in Sweden, the services PMI increased from 47.9 to 48.7. These numbers, coupled with the German retail sales and PMI data released yesterday show that the European economy is recovering.
The EUR/USD pair declined slightly to a low of 1.1165. This price is below the lower line of the symmetrical triangle pattern that has been present in the past two days. The price is also below the 7-day and 14-day exponential moving averages while the relative strength index has been declining. With volumes increasing, the pair may continue to move lower, to test the 1.1150 level.
The GBP/USD pair declined from a high of 1.3212 as the market reacted to the new developments on trade. The pair reached a low of 1.3100, which is between the 50% and 61.8% Fibonacci Retracement level. The price is also along the lower line of the Bollinger Bands while the RSI has been declining. The signal line of the MACD has been declining too. The pair may continue moving lower, to test the 38.2% Fibonacci Retracement level of 1.3050.
The XAU/USD pair eased today as the market seemed to brush-off the Middle East crisis. The pair declined to a low of 1555.50. This is lower than yesterday’s high of 1587.80. The price is above the 14-day and 28-day moving averages. The RSI moved down slightly from a high of 90 to the current 67. The Parabolic SAR dots are above the price. The pair may continue to see some volatility as the market waits for a response from Iran.