Sterling wobbles as the UK enters a new post-EU era
The British pound rose and then pared back the gains as the country enters a new era. The country will leave the European Union officially later today. The UK has been part of the EU for almost half a century. To mark the exit, the British flag will be lowered in Brussels and all other EU institutions. The exit will mark a victory for Boris Johnson and other Brexiteers like Nigel Farage. In a statement yesterday, the outgoing Bank of England governor said that the exit will usher a new period of uncertainty for the UK. The country will immediately start negotiating with the EU for a wide trade deal. It will be a race against time. On February 25, the EU will decide the mandate for negotiations. June 30 will be the deadline for extending the transition period and on November 26 will be the EU’s deadline for agreeing on a trade deal.
Global stocks declined today as the market continued to worry about coronavirus. The World Health Organization (WHO) yesterday declared the disease a global health emergency. At the same time, the US State Department asked Americans not to visit China. Countries around the world are also reacting. A number of airlines such as British Airways, Kenya Airways, Air Canada, Air France, and United Airlines have suspended flights to the country. This has a threat of disrupting the global supply chain because most companies depend on Chinese manufacturers. The disease has already killed more than 200 people and infected almost 10k people. The first case in the UK was reported today.
The euro weakened slightly as the market reacted to the preliminary inflation numbers for January. Data from Eurostat showed that the preliminary core CPI declined from 1.3% in December to 1.1% in January. The headline CPI rose slightly from 1.3% to 1.4%. This inflation rate is still lower than the European Central Bank (ECB) target of 2%. Just last week, the ECB started a review that will look at the impact of the current monetary policy and whether it’s having the necessary effect. Meanwhile, the GDP rose by 0.1% on a QoQ basis. This was below the third quarter’s growth of 0.2%. It rose by 1.0%, which was lower than the previous 1.2%.
The EUR/USD pair rose from an intraday low of 1.1015 to a high of 1.1040. The pair has been gaining this week after reaching a low of 1.0990. The pair appears to have started a new upward trend as shown on the chart below. In fact, the 14-day and 7-day EMAs have made a bullish crossover while the RSI has been moving upwards. The likely scenario is where the pair continues to move upwards as we start a new month.
The GBP/USD pair wobbled today as the UK prepares to move out of the European Union. The pair reached a high of 1.3140, which was the highest level since January 24. The price is still above the short and medium-term moving averages while the signal line and histogram of the MACD are at weekly highs. The pair may continue moving higher during the American session.
The AUD/USD pair declined sharply as the market continued to focus on the coronavirus. The pair reached an intraday low of 0.6682, which is the lowest level since October 2. The price is along the lower line of the Bollinger Bands on the daily chart. The RSI has dropped and is now in the oversold region. The signal line of the MACD to has been moving downwards. The pair may continue moving lower as the fallout of coronavirus continues.