Sterling rose in overnight trading as the House of Commons voted to take control over Brexit, in a blow to Boris Johnson. 20 members of Johnson’s party voted with Jeremy Corbyn’s Labor party. MPs are now expected to vote to avoid a ‘No Deal’ Brexit. Boris Johnson has opposed further pointless Brexit delays. He has also promised to call for another general election with the goal of taking control of Parliament. Brexit has been delayed since March this year. This has made it hard for companies to invest because they don’t know what to expect in the future. Furthermore, continued delays could work against the UK when it negotiates with the EU.
The Australian dollar continued the rally started yesterday after the country released the GDP data for the second quarter. In the quarter, the economy expanded by 0.5%, which was in line with expectation. On an annualized rate, the economy expanded by 1.4%, which was in line with the expectations but lower than the first quarter growth of 1.8%. This data came a day after the RBA delivered its interest rates decision. The bank left rates unchanged and said that the Australian economy was set to improve in the second half of the year.
US stocks declined sharply yesterday as investors reacted to the ongoing trade war between the United States and China. Over the weekend, US added tariffs on Chinese goods worth more than $150 billion. These tariffs range from items like clothes and utensils. China reacted by adding more tariffs on American goods worth $75 billion and by forwarding the issue to the World Trade Organization (WTO). The US stocks also declined after ISM released the PMI data for August that was below expectations. The PMI declined to 49.1 from the previous 51.2. The consensus estimate was that of 51.1. A number below 50 is a sign that the industry is contracting, which is a sign that the manufacturers Trump wants to support are struggling.
Today, investors will continue to watch out for the ongoing political games in the UK. They will also receive the service PMI and retail sales data from Europe. Trade numbers for the month of August from the United States and Canada will be released and the Federal Reserve will also release the Beige Book, which is a document that highlights the economic status from the 12 federal districts.
EUR/USD
The EUR/USD pair is trading at 1.0975, which is slightly above yesterday’s low of 1.0922. The price is slightly above the important support shown in red below. It is also slightly below the 14-day and 28-day moving averages while the RSI is along the oversold level of 30. The average directional index is trading at 30, which is the highest level it has been in months. The pair will likely move higher today as it tries to test the important resistant level of 1.1200.
GDP/USD
The GBP/USD pair rose after the UK Parliament voted to take control of Brexit. The pair reached a high of 1.2110, which was higher than yesterday’s low of 1.1956. On the four-hour chart below, the pair is trading between the 14-day and 28-day moving averages. The RSI has moved from the oversold level of 20 to the current level of 48. The pair will likely continue being volatile as traders wait for the next move by Boris Johnson.
AUD/USD
The AUD/USD pair continued the rally started yesterday after the release of the GDP numbers. The pair is currently trading at 0.6778, which is higher than yesterday’s low of 0.6687. This is the fastest rally the pair has had in more than a month. The current price is slightly below the upper line of the Bollinger Bands. It is also slightly above the short and medium-term moving averages while the RSI has moved to the oversold level of 70. The momentum indicator has continued to soar. The price will likely continue moving higher, although a small retraction could also happen
