Sterling pares gains after a no-deal Brexit ruled out
The sterling rose after parliamentarians in the UK voted against the possibility of leaving the European Union without a deal. This was viewed as a victory for the market, which believes that leaving without a deal with the EU would be chaotic. It was, however, a blow to Eurosceptics who believe that the country can prosper under the World Trade Organization (WTO) rules. This vote leaves the country at a difficult place because the current plan is for the country to leave the EU on March 29. As such, no one knows what will happen if the day comes and passes without the parliament voting for a deal. Today, there will be another vote that will determine whether to extend the deadline. While this is a favorable thing, it will lead to more uncertainty for businesses and for individuals.
The price of crude oil continued the upward trend after data from the US showed reduced inventories. According to the EIA, crude inventories contracted by more than 3.86 million barrels. This drawdown was much lower than the gains of 2.6 million barrels that traders were expecting. Last week, the data showed that inventories had grown by more than 7 million barrels. Earlier in the day, data from the American Petroleum Institute (API) showed a drawdown of more than one million barrels.
In China, the weakness of the economy continued after the release of retail sales, industrial production, and fixed asset investments. In February, retail sales rose by an annualized rate of 8.2%, which was better than the expected 8.1%. It was in line with the growth in January. The industrial production continued weakening, with the growth coming at 5.3%, which was lower than the expected 5.5%. Fixed assets investments grew by 6.1%, which was in line with expectations.
The XBR/USD pair rose to a high of 67.75, which was the highest level since February 22. In the past few weeks, the pair has moved from a low of 63.98. This sharp increase has come as investors bank on the supply cuts announced by OPEC and the perception that demand too will rise. On the hourly chart, the pair is trading above the 25-day, 50-day, and 200-day moving averages, while the momentum indicator has moved above 100 and the RSI has remained above 70. This momentum is likely to continue for the coming days.
The EUR/USD pair declined slightly in overnight trading. The pair is now trading at 1.1320, which is slightly below the 61.8% Fibonacci Retracement level. The price is below the 25-day and 50-day moving averages. On the hourly chart, the 50-day EMA is along the 50% Fibonacci Retracement level. The signal line of the Stochastics Oscillator has moved below the oversold level of 20. The pair could continue moving lower until it tests the 50% Fibonacci level of 1.1297.
The sterling rose sharply after legislators voted against a no-deal Brexit. It reached a high of 1.3380, which was the highest level since June last year. The GBP/USD pair then pared those gains as traders sold the news. It is now trading at 1.3240. This price is above the 25-day and 50-day EMAs while the RSI has dropped from the overbought level of 78 to the current 58. The pair will likely reach the 50% Fibonacci level of 1.3166.