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Pound Swings on Brexit Headlines as Traders Brace for Volatility Ahead By Investing.com

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© Reuters.

By Yasin Ebrahim

Investing.com – The pound swung between gains and losses against the dollar Thursday as traders mulled differing headlines that suggest little progress on the U.K. and EU breaking the deadlock in Brexit talks.

fell 0.28% to $1.2891, though had been as high as 1.2979 and as low as $1.2820.

The U.K. and EU continued talks in Brussels to iron out key issues holding up the potential post-Brexit deal, but differing reports of progress suggest both sides remain wide apart on reaching a consensus.

Reuters reported, citing an EU official, that were no signs of a “landing zone” on key sticking issues, including fisheries and the level playing field in the latest trade negotiations with the U.K.

That cooled optimism from an earlier Financial Times report, citing unnamed sources, that a landing zone on state aid has been identified but “fishing is the last sticking point.”

The U.K. has made it clear it is unlikely to cave in on demands to take control over access to its waters and fish when the Brexit transition period ends, rather than stick with the EU’s Common Fisheries Policy, which set fishing quotas among EU member states. “So now, we’re going to be absolutely crystal clear with the EU …. if you’re not going to talk turkey with us, that’s fine. We can leave, we can say that’s it, no negotiated outcome. We’re ready, come what may,” Cabinet Office Minister Michael Gove said.

The latest round of trade talks kicked off against a souring backdrop after the EU followed up on its threat to take legal action against the U.K. after it failed to scrap its internal market bill that undermines the withdrawal agreement.

Pressure on negotiators to break the stalemate is building ahead of the European summit in mid-October, when EU negotiator Michel Barnier is slated to provide the EU with an update on Brexit negotiations.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.





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Forex

GBP/USD Shrugs Off Dire UK Borrowing Data

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GBP price, Brexit news and analysis:

  • UK public sector borrowing in the first half of the current financial year was more than six times the figure a year earlier due to the economic cost of the coronavirus pandemic.
  • Official data also showed that public-sector debt rose further above the £2 trillion level and reached its highest as a percentage of GDP since 1960.
  • UK inflation in September rose to 0.5% from 0.2%.
  • Nonetheless, GBP/USD held its ground as “risk-on” assets benefited from rising hopes that a US fiscal stimulus package can be agreed.
  • The FTSE 100 index, though, is falling back.

GBP/USD edging up despite poor UK economic data

GBP/USD largely ignored a very poor set of UK borrowing, debt and inflation data early Wednesday, suggesting some continuing underlying vigor as “risk-on” assets benefited from rising hopes of a US fiscal stimulus package, and economic strength in China.

There are also hopes that US-China relations could improve if Joe Biden wins the US Presidential election on November 3.

GBP/USD Price Chart, One-Hour Timeframe (October 16-21, 2020)

Latest GBP/USD price chart.

Chart by IG (You can click on it for a larger image)

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FTSE 100 falls back, Brexit talks still a focus

By contrast, the FTSE 100 index of the major London-listed stocks was weaker in early trading Wednesday and there was mixed news on possible trade deals. While the EU-UK negotiations on their relationship once the Brexit transition period ends on December 31 continue to show no signs of progress, the US and the UK have launched a new round of talks focused on goods and tariffs.



of clients are net long.



of clients are net short.

Change in Longs Shorts OI
Daily -6% 9% -2%
Weekly 24% -25% 3%

UK borrowing, debt and inflation all rise

Turning to the UK economy, the cost of the coronavirus pandemic was evident in a very poor set of borrowing, debt and inflation data released Wednesday before the UK markets opened. Government borrowing in the first half of the 2020/21 fiscal year was more than six times the level a year earlier due to the cost of supporting the UK economy during the coronavirus pandemic.

Public sector debt climbed further above £2 trillion to 103.5% of GDP, the highest debt/GDP ratio since 1960.

However, the potentially negative impact of the borrowing and debt data was offset by the news that UK inflation rose to 0.5% year/year in September, up from 0.2% in August.

UK borrowing, inflation data.

Source: DailyFX economic calendar

You can find a guide to reading an economic calendar here

We look at currencies regularly in the DailyFX Trading Global Markets Decoded podcasts that you can find here on Apple or wherever you go for your podcasts

— Written by Martin Essex, Analyst

Feel free to contact me on Twitter @MartinSEssex





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Dollar Falls To One-Month Low on Stimulus Hopes By Investing.com

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© Reuters.

By Peter Nurse

Investing.com – The dollar weakened in early European trade Wednesday to a one-month low, as increased optimism surrounding a new U.S. stimulus package helped boost the demand for riskier currencies, to the detriment of the greenback. 

At 2:55 AM ET (0655 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, was down 0.3% at 92.787, falling to its lowest level for a month. was up 0.3% at 1.1859, reaching a one-month high, while was down 0.3% at 105.23. 

News that President Donald Trump was willing to accept a large aid bill, as a string of negative opinion polls puts pressure on him to get a deal done before the Nov. 3 election, has raised hopes for a stimulus breakthrough.

Negotiations between House of Representatives Speaker Nancy Pelosi and Treasury Secretary Steven Mnuchin will continue on Wednesday.

That said, the dollar losses haven’t been extreme as there remains strong opposition from within Trump’s own Republican Party about a package of any real size being agreed.

“All in all, a fresh stimulus bill before the elections remains far from certain and we suspect there is not much of it currently being priced in by the markets, which should keep the downside for risk assets relatively limited if prospects of a bipartisan-deal eventually collapse,” said analysts at ING, in a research note.

Aside from the political maneuvering in Washington, traders will look to the release of the Federal Reserve’s October for clues of the extent of the U.S. economic recovery. It will provide a snapshot from businesses and communities about how the resurgence of Covid is being felt across the country.

Elsewhere, traded 0.4% higher at 1.2997, after annual inflation in the U.K. accelerated in September. rose 0.5% on year in September compared with a 0.2% rise in August, driven by higher transport costs, as well as higher prices at restaurants.

Separate figures showed the government borrowed 36.1 billion pounds ($46.75 billion) in September, the third-highest total for any month since records began in 1993, to help finance various coronavirus-relief packages for the economy.

“Whilst it’s clear that the coronavirus pandemic has had a significant impact on our public finances, things would have been far worse had we not acted in the way we did to protect millions of livelihoods,” British finance minister Rishi Sunak said.

Additionally, traded 0.5% lower at 6.6411, falling to its weakest level since July 2018, a consequence of the Chinese economy’s relatively strong rebound from the pandemic.  

“China is the strongest economic story in town, relative to Europe and the U.S.,” said Bank of Singapore currency analyst Moh Siong Sim,in a Reuters report. A Joe Biden presidency, he added, could also provide support by calming Sino-U.S. relations.

On Monday, China reported that its grew 4.9% in July-September from a year earlier.

 





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Crude Oil Prices Edge Higher on Weaker US Dollar, EIA Report in Focus

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CRUDE OIL OUTLOOK:

  • WTI crude oil attempts to challenge a key resistance level at US$ 41.50
  • The US Dollar index fell for a second day on stimulus hopes, improving sentiment
  • Oil traders eye key EIA data, expecting further drop in stockpiles amid softening demand outlook

WTI crude oil prices edged higher on Wednesday, challenging a key resistance level at US$ 41.50. Oil prices were boosted by stimulus hopes and a falling US Dollar after US House Representatives Speaker Nancy Pelosi self-imposed a deadline for the White House to approve the relief package. The DXY US Dollar index fell for a second day to 92.92 – the lowest level seen in a month.

Oil traders are also eyeing Wednesday’s EIA inventory reports, expecting a 1.02 million barrels fall in US crude oil stockpiles. Oil prices have historically exhibited a negative correlation with inventory changes, and the past 12 months’ data can be viewed on the chart below.

Crude Oil Prices Edge Higher on Weaker US Dollar, EIA Report in Focus

Source: DailyFX

In the medium term, falling crude stockpiles would likely underpin WTI prices. Total US inventories (excluding strategic petroleum reserves) have declined from 536.7 million barrels in Mid-July to 489.1 million barrels recently. Yet, the current level of US crude oil inventories is about 11% above the 5-year average for this time of year.

It is worth noting, however, that falling crude inventories should not mask a weakening demand outlook, which remains a key drag to oil prices. Recent EIA reports have pointed to declines in refinery inputs, gasoline production and distillate fuel production, as downstream demand weakened. Refineries operated at 75% of their operable capacity in the week ending October 9th. US crude oil imports have also fallen by nearly half a million barrels a day from the previous week.

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Recommended by Margaret Yang, CFA

What does it take to trade around data?

Flight data compiled by flightradar24 has also shown a slower pace of recovery in global flights numbers, which may serve as a good proxy for transportation fuel demand (chart below). The 7-day moving average of total flights tracked by the website was at 143,572 on October 20th, down by 26% from the same period last year. The number of daily flights appeared to have come off its recent peak seen in end September as the effects of pandemic-related measures may have resulted in less travel.

Crude Oil Prices Edge Higher on Weaker US Dollar, EIA Report in Focus

Source: Flightradar24

Technically, WTI crude oil prices look set to re-test a key resistance in the US$ 41.00-41.50 area (highlighted on the chart below). Breaking above this level may offer room for more upside potential towards US$ 43.8 – the previous high. A retreat from current levels may lead to further consolidation at around US$ 40.00 (20-Day SMA).

WTI Crude Oil PriceDaily Chart

Crude Oil Prices Edge Higher on Weaker US Dollar, EIA Report in Focus

IG Client Sentiment shows that 48.82% of retail traders are net-long oil, with the ratio of traders short to long at 1.05 to 1 (chart below). Compared to a day ago, retail traders have significantly increased their short positions (+27.5%) while reducing long positions (-16.8%). Compared to a week ago, the number of traders net-short has increased by 45% while the net long side has decreased by 19%. From a contrarian point of view, a drastic change in retail traders’ sentiment towards a shirt-side bias may infer further strengthening in crude oil prices.

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Crude Oil Prices Edge Higher on Weaker US Dollar, EIA Report in Focus

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Building Confidence in Trading

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Don’t give into despair, make a game plan

— Written by Margaret Yang, Strategist for DailyFX.com

To contact Margaret, use the Comments section below or @margaretyjy on Twitter





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