GBP rises sharply as Theresa May clinches EU concessions
The UK pound rose sharply in overnight trading after Theresa May secured concessions from the European Union on her Brexit deal. The concessions aimed at reassuring British lawmakers that the country would have the power to break away from the EU economic orbit if a trade deal is not reached after Brexit. Even with this reassurance, Theresa May faces an uphill task to convince parliamentarians to vote on her deal. These talks are aimed to iron out a major issue on how to deal with Ireland, which will remain being part of the European Union, and North Ireland which is a part of the UK. Eurosceptics worry that Theresa May’s deal will trap the UK into the EU’s customs union if the two can’t accept a deal. On economic data, traders will focus on the manufacturing, industrial production and trade data expected later today.
The price of crude oil continued to rally as traders continued to cheer the supply cuts from OPEC. In December, OPEC members and Russia agreed to cut supplies with the goal of hiking prices. This led to a sharp rise in prices. At the same time, pressure from Donald Trump to keep prices down does not seem to be having any effect. Over the weekend, an OPEC official told WSJ that the OPEC deal will likely remain until officials meet in June. In a statement, Bank of America Merrill Lynch said that it expects Brent to rise to $70 and WTI to reach $60 a barrel. This gain will be fueled by the increasing demand, especially from the marine sector as the new fuel rules by the International Maritime Organization kick in.
It will be an important day for the USD as the US is expected to release the CPI numbers. The headline CPI is expected to have risen by 1.6% in February while the core CPI is expected to have risen by 2.2%. On a MoM basis, the headline CPI is expected to have risen by 0.2% while the core CPI is expected to have remained unchanged at 0.2%. The US, like other developed countries, is experiencing a period of low inflation rate. In part, this has contributed to the relatively dovish statements coming from the Federal Reserve.
The EUR/USD pair rose in overnight trading after Theresa May’s deal with the EU. The pair reached a high of 1.1270. This level is above the 21-day and 42-day exponential moving average while the RSI has moved up to almost the overbought level of 70. The momentum indicator has remained above 100 and the current level is along the 38.2% Fibonacci Retracement level. The next levels to watch will be the 50% and 23.6% Fibonacci levels of 1.1300 and 1.1230.
The GBP/USD pair rose sharply to a high of 1.3263, which was the highest level since March 4. This price is much higher than the 21-day and 42-day moving averages. The RSI has moved above 70 while the signal line of the MACD has risen to the highest level since February. The current price of 1.3210 is along the 61.8% Fibonacci Retracement level. The pair will likely fall to the 50% Fibonacci level of 1.3150 and then resume the upward trend.
The AUD/USD pair was relatively unchanged after a report showed that home loans had declined sharply. The pair is currently trading at 0.7070, which appears to be a strong resistance level. This level is close to the 38.2% Fibonacci Retracement level. The price is above the 21-day and 42-day moving averages while the RSI has moved to almost 70. The price could break the resistance and move up, but this will depend on the US inflation data.