GBP rises sharply ahead of a key parliamentary vote
The sterling jumped today ahead of an important no-deal Brexit vote. This vote comes a day after parliamentarians rejected a deal proposed by Theresa May. In today’s vote, they will decide on whether to let the country exit the European Union without a deal. This will be followed by another vote tomorrow on whether to extend the Brexit period. Opinion is divided on the issue. Eurosceptics believe that the country will do well without a deal while supporters of the European Union expects chaos. Studies by credible organizations found that the economy could drop by a few basis points if the country leaves without a deal. Also, a number of companies have announced that they plan to leave the country if there is no deal.
The USD continued to weaken against major currencies after the US released weaker economic data. In February, the PPI rose by an annual rate of 1.9%, which was in line with expectations. On a MoM basis, the PPI rose by 0.1%, which was lower than the expected 0.2%. The core PPI rose by an annual rate of 2.5% and at a monthly rate of 0.1%. These were below the expected 2.6% and 0.2% respectively. The PPI, which is a good indicator of inflation came a day after sluggish CPI data were released. On a positive note, the durable goods orders rose by a monthly rate of 0.4%, which was higher than the expected contraction of -0.5%.
The Japanese yen weakened slightly against the USD after the release of PPI and machinery order numbers. The PPI rose by an annualized rate of 0.8%, which was higher than the expected 0.7%. On a monthly basis, the PPI rose by a rate of 0.2%. On the negative side, the core machinery orders contracted by a YoY rate of 2.9%. This was a sharper contraction than the 2.3% that traders were expecting. On a MoM basis, the machinery orders declined by 5.4%.
In other news, shares of Boeing rose today as the FAA was under pressure to ground the 737-Max after the crash in Ethiopia. Yesterday, a number of airlines continued to ground the plane and today, Hong Kong placed a temporary ban on the plane. Meanwhile, Spotify launched a new lawsuit in the European Courts against Apple. The lawsuit claims that Apple has discriminated against Spotify products, which is an uncompetitive measure. The suit comes after a proposal by Elizabeth Warren to break big tech companies that also provide marketplace solutions. Despite all this, US markets opened higher, with the Dow gaining more than 100 points.
The EUR/USD pair was relatively unmoved in today’s trading. It is now trading at 1.1297, which is a few pips below the important resistance level of 1.1300. On the hourly chart, the pair is trading along the upper band of the Bollinger Bands. It is also slightly above the important diagonal support shown below, which is an indication that the pair is on an uptrend. The Money Flow Index (MFI) has remained a bit lower than the overbought level of 70. The pair will likely continue moving higher, with the downward movements being ideal entry points.
The USD/JPY pair started an upward trend in January, when it traded at 106.45. Today, the pair remained relatively unmoved at 111.32, which was slightly lower than the YTD high of 112.15. On the four-hour chart, the price is along the 42-day and 21-day EMAs but slightly higher than the 100-day EMA. At the same time, the On Balance Volume has remained at the highest level this year. The pair could start coming down, especially as the US data weakens.
The GBP/USD pair rose sharply today to a high of 1.3197, which is a few pips below the important 1.3200 level. The pair rose ahead of a crucial parliamentary vote on Brexit. With the upward movement, it is looking to pare the losses experienced on Monday and yesterday. At this price, the pair is trading above the short and medium-term moving averages while the RSI has continued to move up. The upward trend could continue, although traders could sell the sterling on the news of an extension.