Sterling drops as the likelihood of a no-deal Brexit increases

The British pound declined by more than 1% as traders worried about the likelihood of a no-deal Brexit. In a statement last week, Boris Johnson said that the UK would be fine in case the two sides fail to make a deal. And today, the Financial Times reported that the UK was preparing to unveil a bill that would contravene the withdrawal agreement the two sides signed earlier this year. The new bill will seek to streamline movement of business between England, Wales, Scotland and Northern Ireland, after Brexit. The pound also declined because of the overall stronger US dollar. The dollar index rose by more than 0.30% as traders continued to react to strong employment and PMI data from the United States.

The Australian dollar was little changed today as traders reacted to the impressive trade data from China and news that Victoria state will extend its lockdown. In a statement earlier today, China’s statistics office said that exports increased by 9.5% in August while imports fell by 2.1%. As a result, the trade surplus narrowed to more than $58 billion. These numbers show that China, Australia’s biggest trading partner, is on a path towards recovery. At the same time, the Australian dollar reacted to news that Victoria will extend its lockdown to the end of the month. This is likely to slow the country’s recovery path.

The euro declined slightly today as traders reacted to weak data from European countries. According to the German statistics office, the country’s industrial production rose by 1.2% in July, down from the previous increase of 9.3%. Analysts polled by Reuters were expecting the production would rise by 4.7%. Other data showed that the Swedish current account declined from more than $75 billion in the first quarter to $63.2 billion in Q2. Focus still remains on the European Central Bank (ECB), which will deliver its rates decision on Thursday.

EUR/USD

The EUR/USD pair is trading at 1.1822, which is slightly below the day’s high of 1.1852. The price is slightly above the ascending trendline that is shown in white. It is also between the two lines of the envelope indicator. The average true range (ATR), which is a good measure of volatility, has declined to the lowest level since August 27. Therefore, because of the consolidation shown in red, the pair is likely to breakout lower.

XBR/USD

The XBR/USD pair continued to decline today. It is trading at 42.05, which is the lowest it has been since July 30. On the daily chart, the price was previously forming a rising wedge pattern, which is usually a bearish pattern. It has also moved below the 50-day and 100-day exponential moving averages. It is also slightly above the 38.2% Fibonacci retracement level. Therefore, the price is likely to continue falling as bears aim for the next psychological level at 40.00.

GBP/USD

The GBP/USD pair dropped today because of the rising risks of a no-deal Brexit. It reached an intraday low of 1.3150, which is the highest it has been since August 26. On the daily chart, the price also moved below the 100-day and 50-day moving averages. It also moved below the important ascending yellow trendline. At the same time, the two lines of the MACD have moved below the neutral level while the RSI has continued to drop. Therefore, the price is likely to continue falling as bears target the next support at 1.3000.