Sterling jumps on better-than-expected construction PMI
Global stocks were mixed today as the market reacted to the latest trade war threats. The Trump administration said that it would increase its tariffs on imported steel and aluminium from Argentina and Brazil. Later on, Trump said that he would apply a 100% duty on French goods worth more than $2.4 billion. He blamed France of unfairly targeting American technology companies like Google and Apple with a digital tax. In a radio interview, French finance minister, Bruno Le Maire, said that the EU was ready to retaliate against these tariffs. He said that France was also prepared to abandon the taxes if a deal was made at the OECD. Progress has been slow and the US has been blamed for that. In France, the CAC dropped by 40 points while in Germany, the DAX rose by 40 points.
The sterling rose today after data showed an improvement in the construction sector. The IHS Market survey showed that PMI rose to 45.3 in November. This was higher than 44.2 in October. A PMI reading of 50 and below is usually a sign of contraction. According to Markit, this activity slowed as a result of Brexit uncertainty, an impending election, and wet weather. Civil engineering was the worst performing category followed by commercial construction. Housing activity also declined albeit at a slower level. The construction PMI has been below 50 since April this year. Meanwhile, the FTSE declined today as FTSE Russel announced that Marks & Spencer, Micro Focus, and Direct Line would be demoted to FTSE 250.
The Australian dollar rose today as the market reacted to the RBA rates decision. The central bank left interest rates unchanged at 0.75% as was widely expected. The bank sounded optimistic about the Australian economy after having a soft patch in the second half of the year. It now expects growth to pick up gradually to about 3% in 2021. This will be spurred by low interest rates, growing public spending, recent tax cuts, and an upswing in housing prices. The market will receive the final reading of the third quarter GDP. This data is expected to show that the economy expanded by an annualized rate of 1.7% in the quarter. Meanwhile, Australian stocks fell sharply due to rising tensions on trade.
The GBP/USD pair rose to a high of 1.2995. This was the highest level since October 22 this year. This price was slightly above the 100% Fibonacci Retracement level. It is also along the upper line of the Bollinger Bands while the RSI remains above the overbought level of 70. The dots of the Parabolic SAR indicator are below the price. There is a possibility that the pair may continue moving higher. However, there is also a possibility that the pair may decline slightly after testing the 100% Fibonacci Retracement level.
The AUD/USD pair rose sharply today after the construction PMI data. The pair reached a high of 0.6860, which was the highest level it has been since November 11. The price is above the 14-day and 28-day moving averages. It is also between the 23.6% and 38.2% Fibonacci Retracement level. The RSI has moved above the overbought level while the momentum indicator has continued to soar. The pair may continue moving higher in the American session.
The EUR/USD pair rose sharply yesterday from a low of 1.1000 to a high of 1.1090. The pair remained along this channel today as the market waited for more talk on EU and US trade. The pair is now trading at 1.1075, which is slightly below the high of 1.1086. On the hourly chart, the current channel is important because the pair traded along the same channel less than two weeks ago. As a result of the consolidation, the price is along the 14-day moving averages and slightly above the 28-day moving averages. The pair may consolidate further ahead of the US NFP data.