Global markets mixed ahead of UK Brexit vote
Global markets were mixed today as investors received divergent information. Earlier in the day, China announced that it will issue a large stimulus package to spur its growth. The country’s announcement came as recent data has shown a slowdown in economic growth. Meanwhile, in Europe, markets were mixed as investors waited for a parliamentary vote on Brexit. In the United States, large company earnings released mixed results. Wells Fargo reported EPS of $1.21, which was higher than the expected $1.16 while JP Morgan missed earnings for the first time in ten quarters.
In the United Kingdom, members of parliament were expected to vote today on the Brexit proposal negotiated by Theresa May’s government. The prime minister is expected to lose the vote. This is because most members believe the deal will not be in the country’s interest. Earlier this week, a former M16 head and a former defense secretary wrote a letter cautioning the members against voting for the deal.
In the United States, the data released was disappointing. The numbers showed December’s PPI at minus 0.2%. This was lower than the consensus estimates of minus 0.1%. On a YoY basis, the PPI remained unchanged at 2.5%. The core PPI for the month was unchanged at 2.7% but lower than the expected 2.9%. The New York State Manufacturing Index for January was at 3.90, which was lower than the expected 10.75.
The EUR/USD pair declined today as traders waited for the Brexit vote. The pair reached an intraday low of 1.1410, which was lower than yesterday’s high of 1.1570. The current price of 1.1425 is lower than the 21-day and 42-day EMA. On the hourly chart, the RSI has moved from the overbought level of 70 to the current 36. While the pair could continue declining, it will likely be volatile during the US session when the vote will take place.
The GBP/USD pair declined sharply to an intraday low of 1.2830. This decline happened as investors anticipated Theresa May to lose the vote in parliament. The current price is below yesterday’s closing price of 1.2915. On the hourly chart, the pair’s price is below 21-day and 42-day EMA while the RSI has declined close to the oversold level of 30. The direction of the pair will depend on the outcome of the vote. Analysts at Citi said that the pair could move by 10% in either direction.
The price of crude oil jumped after China said it will offer a stimulus package to boost demand. The price of US crude rose to an intraday high of $51.66. On the 30-minute chart below, the price of crude has been forming a symmetrical triangle pattern as shown below. This means that the price could breakout in either direction. If it moves higher, the price will retest the previous highs of $53.