More uncertainty for sterling as EU gives a long Brexit extension
Sterling was relatively unmoved as EU leaders accepted a new Brexit delay. The deadline will be extended until the end of October, with a review in June. Angela Merkel and other EU leaders were prepared to offer a much longer delay, a move that was rejected by Emmanuel Macron. In addition, the EU will continue to monitor UK guarantees to prevent it from interfering with long-term EU plans including the election of the next EU Commission President and the EU budget. This new extension means that Brexit uncertainty will continue, which presents more risks to the UK. For example, companies will be afraid to invest in the country because of the uncertainty.
After initially gaining, the USD stabilized after the Fed released minutes from the March meeting. In the meeting, officials kept their options open regarding interest rates. This is as they weighed the significant uncertainties over the US and global economic growth. This was a change of tone after the previous hawkish statements by the bank. The reason for the change of direction is that the US economy has shown signs of slowdown. The same is true for the world economy. Indeed, on Tuesday, the IMF announced that it was lowering its global economic outlook to 3.3%. In addition, the Fed is facing increased pressure from the US President, who has called for rate cuts and more quantitative easing.
The price of crude oil remained near YTD highs after the EIA released its weekly inventories data. Data from the organization showed that inventories rose by more than 7 million barrels. This was much higher than the 2.29 million barrels that traders were expecting. Last week, this data showed an increase of more than 7.2 million barrels. Previously, data from API had showed that inventories increased by more than 2 million barrels. Today, traders will continue to monitor the situation in Libya. They will also receive the monthly report from the EIA.
The EUR/USD pair declined to a low of 1.1228 after the Fed released its minutes. It then stabilized and is currently trading at 1.1277 as traders wait for more economic data from Europe. The current price is above the 25-day and 50-day moving averages and closer to the upper line of the Envelopes indicator. After rising sharply after the FOMC meetings, the volumes have returned to yesterday’s lows. There is a likelihood that the pair will continue moving higher as it tries to test the important resistance of 1.1300.
The EUR/CHF pair started an upward trend on Monday last week, when it traded at the 1.1160 level. Overnight, the pair reached a high of 1.1305, which is the highest level since March 22. On the hourly chart, this price is closer to the upper line of the Bollinger Bands, while the RSI has remained below the overbought level. In addition, the Average Directional Index (ADX) has declined from a high of 60 to the current 27. Therefore, the pair could find some resistance in these levels.
The XTI/USD pair remained near the YTD highs after the inventory numbers from the US. The pair is now trading at 64.29, which is close to the high of 64.70. On the hourly chart, this price is along the 25-day EMA and slightly above the 50-day EMA while the Bulls Power has turned negative. The accumulation and distribution indicator has remained near YTD highs. There is a likelihood that the pair will continue moving upwards as it attempts to test the important resistance level of 70.