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Sterling Surged on Brexit Deal Optimism, New Zealand Dollar Tumbles on Business Confidence

Sterling surged overnight as boosted by comments from EU indicating that they’re committed to a deal Brexit deal with the UK. The Pound remains firm in Asian session and is now the strongest one for the week. Swiss Franc is mixed in Asia but remains the second strongest one. Reemergence of Turkish Lira crisis is a factor that pressures the Euro and lifts the Franc. USD/TRY is now back at 6.47, comparing to 5.69 just two weeks ago, with risk of heading back to 7.00 handle. Canadian Dollar is steady today but it’s the third strongest one for the week. Negotiation between Canada and US appears to be progressing well, and it’s hopeful for a deal by Friday. On the other hand, Australian and New Zealand Dollar are staying as the weakest, with fresh selling seen in Kiwi after terrible business confidence data.

In other markets, S&P 500 and NASDAQ extended recent record runs overnight. And more importantly, both picked up momentum again. S&P 500 closed up 0.57% at 2914.04, a record. NASDAQ gained 0.99% to 8109.69, also a record. DOW also rose 0.23% to 26124.57. Treasury yields were mixed with five year yield up 0.006 at 2.780, 10 year yield flat at 2.884 and 30 year yield down -0.013 at 3.021. Positive sentiments didn’t carry through to Asia though. Nikkei pared back initial gain and is just up 0.17% at the time of writing. Hong Kong HSI is down -0.61%, China Shanghai SSE is down -0.81%, Singapore Strait Times is down -0.71%. Gold stays in tight range as consolidation continues, but holds above 1200.

Technically, GBP/USD’s rebound should have confirmed medium term bottoming at 1.2661 and we’d see more upside 1.3316 fibonacci level. EUR/USD is already close to equivalent level at 1.1779. EUR/USD could feel some “heaviness” ahead of 1.1779. Meanwhile, EUR/CHF’s break of 1.1363 suggested that rebound from 1.1242 might have completed earlier than expected at 1.1452 and deeper fall is in favor. On the other hand, it looks like GBP/CHF has bottomed out just ahead of 1.2500 handle. All factors combined could give EUR/GBP extra selling pressure. That is, while EUR/GBP is still trading inside rising channel, such bullishness could be challenged. The interactions between these pairs would be a joy to watch, even if you’re not trading them.

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EU Barnier to offer unparalleled partnership to UK after Brexit

EU chief negotiator Michel Barnier said that the EU is prepared to offer a partnership with UK unlike with another other country. That’s seen as a gesture that EU is committed to a deal. Barnier said in Berlin that “we are prepared to offer Britain a partnership such as there never has been with any other third country.” And, “we respect Britain’s red lines scrupulously. In return, they must respect what we are,” he said. “Single market means single market … There is no single market a la carte.”

Brexit Minister Dominic Raab also told the parliament that a Brexit deal with EU was “within our sights” and the negotiation would intensifies as the divorce date approaches. Raab also added that UK’s Brexit plan received positive reactions from EU. He said the plan “had a reasonably positive landing” And “we’re getting a lot of constructive engagement, and … a lot of talk about the practical considerations rather than ‘in principle’ dismissal, and I think that’s valuable from our point of view”.

Canada-US trade dea