Global markets rose today, erasing some losses made last week as the issue of trade increased. In Asia, the Shanghai composite index and the Nikkei rose by 2.5% and 2.1% respectively while the Chinese Yuan continued to rise against the US dollar. US futures too point to a higher open. Perhaps, traders are hoping that Trump will change his mind when he meets his NATO and Russian counterparts this week. In recent weeks, the global markets have been on edge as traders’ worries about a trade war increased.
The US dollar fell to the lowest level in weeks as traders expect other central banks will move faster. The Bank of England (BOE) is expected to hike at its August meeting while the European Central Bank (ECB) is expected to start talking about hiking early next year. This week, the Bank of Canada is expected to point to a hike either this year or early next year. On the other hand, while the Fed is expected to hike two times this year, there are concerns that officials will be forced to either halt the gradual tightening or even start reducing interest rates in 2020.
The British pound rose today even as the Brexit minister announced his resignation. Foreign minister Boris Johnson is also on the edge. This came as a new survey showed that more British residents felt shortchanged in the deal negotiated by Theresa May. They believe that the new deal kills the spirit of the Brexit vote. The foreign minister, David Davis will be replaced by Dominic Raab.
The Japanese Yen was little moved against the dollar even as the economic data released today was mixed. The closely-followed Watchers Current Index was at 48.1, which was lower than the expected 48.2. On a positive side, the country’s current account for May was JPY 9.3 trillion, which was better than the expected JPY 1.2 trillion. The bank lending rate increased at an annual rate of 2.2%, which was higher than the expected 2.0%. Meanwhile, in Switzerland, the unemployment rate rose to 2.4%, which was similar to June but higher than the expected 2.3%.
The EUR/USD pair continued the rally to reach an intraday high of 1.1778. The price is above the medium and longer-term moving averages and is slightly lower than the upper band of the Bollinger bands. Its RSI is currently near the overbought level while the MACD has flattened. As a result, there is a likelihood for a slight revision for the pair, although the upward momentum could resume.
The GBP/USD pair went above the important resistance price of 1.3313 and reached an intraday high of 1.3360. The pair’s momentum is mostly because of the vote by the Prime Minister’s cabinet on Brexit. The price is at the higher band of the Bollinger Bands while the RSI has crossed the 70 level. This level usually represents the overbought level. Therefore, while the political environment might continue to support the cable, some traders might exit their long trades which could lead to a minor correction.
The AUD/USD pair was among the best-performing pairs today, continuing a rally that was started early this month. It is now trading at 0.7475, which is the highest level since mid-June. Traders believe that the RBA will likely start raising interest rates especially after the encouraging inflation data released last month. The price is now above the 25 and 50-day moving average. It is also above the important resistance level of 0.7445. The RSI is currently near 80, while the price is way above the upper Bollinger Bands. This means that the pair will likely fall as bulls take profits. This will see it test the important level of 0.7445 which is also the middle band of the Bollinger Bands.