FOCUS SHIFTS TO UK PARLIAMENT AFTER EU PASSES BREXIT DEAL
On Sunday, the European leaders voted to accept the proposed Brexit deal. In the coming two weeks, Theresa May will work hard to convince the members of parliament to accept the deal. In a statement yesterday, she said that the MPs who will vote against the proposal will risk plunging the country into ‘more uncertainty and division’. She also said that the Brexit deal was one that worked for the EU and the UK. She will have an uphill task convincing her fellow conservative members to accept the deal. Already, more than 90 MPs have criticized the agreement. Today, she will meet her cabinet before embarking on a two-week campaign for the deal.
The yen dropped sharply against the USD after Japan released the manufacturing PMI numbers. The numbers showed that manufacturing activity in the country declined to 51.8. This was against October’s PMI of 52.9 and the consensus estimate of 51.9. The PMI was the lowest it has been since November 2016. The declining activity in the manufacturing sector is worrying because of the important role it plays in the Japanese economy.
The New Zealand dollar rose slightly against the USD in the Asian session even after disappointing retail sales from NZ. Retail numbers showed that the core retail sales in the third quarter rose by 0.3%. This was lower than the consensus estimate of 1.5% and the second quarter’s 1.3%. It was also the lowest reading since November 2016. The annualized quarterly retail sales number softened to 2.7%. This was the lowest it has been in almost ten years.
On Friday, the EUR/USD pair dropped sharply to intraday low of 1.1325. This was the lowest level of the week. Today, it was little moved in the Asian session as traders wait for the Trump-Xi meeting and important economic data from the EU. It is now trading at 1.1340, which is slightly above Friday’s closing price. The double EMA indicators and the pair’s price action show a likelihood of continued weakness. The RSI has moved above the oversold level of 30 and is currently at 37. This happened in low volume trades, which means that the upward move could be a false breakout. Therefore, it will likely move lower and potentially reach the 1.1300 level.
The GBP/USD was little moved today as traders remained pessimistic about the likelihood of a vote in favor of the deal passed by the EU27. It is now trading at 1.2813, which is slightly above the Friday’s close of 1.2794. The volatility index remained at Friday’s lows as shown below. Its short and long-term EMAs show indecision in the pair. This week, the focus will remain on Theresa May and the conservative party as MPs announce how they will vote.
In the past week, the NZD/USD pair has been making lower lows and lower highs. This has seen the price drop from 0.6883 to 0.6754. Today, it moved slightly higher, even after the weak retail sales numbers. It is now trading at 0.6785. The upward movement today happened in a low-volume market as shown below. This means that there is a likelihood that the pair will resume the downward trend today.