UNEASY CALM AFTER THERESA MAY WINS CONFIDENCE VOTES
Sterling was volatile in overnight trading after Theresa May won a vote of confidence in Westminster. After the vote, sterling rose sharply but the gains could not be sustained. After reaching a high of 1.2670, the GBP/USD pair then dropped to a low of 1.2590. This is because the vote left a party deeply divided. As May heads to Brussels, she will likely be thinking about how to balance the interests of pro-Brexit Tories with those of pro-European Tories. This is because she will need each of their votes considering that the Labor party will be unlikely to support her plan.
The price of crude oil declined sharply after inventory data from the EIA yesterday. In the Asian session, the price moved up slightly. Numbers showed that in the past week, inventories had reduced by 1.2 million barrels. This was a lower reduction than investors were expecting. Investors were expecting the drawdown to be more than 2.99 million barrels. Earlier on, the American Petroleum Institute (API) had released numbers that showed an inventory drawdown of more than 10 million barrels.
The Swiss Franc declined against the USD in overnight trading as traders waited for the decision by the Swiss National Bank. The interest rates decision will be made in the morning hours of the trading day. While the bank is not expected to raise or lower interest rates, traders will be looking at their statement for direction. In previous meetings, the bank has been careful about not changing the monetary policy. This is because such a move would likely lead to a stronger Franc. The bank favors a weaker currency to help improve the exporting industry.
The EUR/USD pair moved up after Theresa May’s confidence vote. It reached an intraday high of 1.1386. The hourly chart below shows that the pair has been making large intraday swings. This has made the pair lack an upward or downward trend. The current price is slightly above the 25-day and 50-day EMA. This sideways direction could be changed today after the ECB decision.
The GBP/USD pair moved up in overnight trading but found resistance at the 1.2670 level. With May still in power, traders will focus on whether she can get an acceptable deal before the vote in parliament. It is now trading at the 1.2613 level. This price is slightly above the 50-day and 25-day EMA. After rising sharply, the Chaikin oscillator has moved lower to the neutral level. The same is true with the Relative Vigor Index (RVI). In the short term, the pair could continue going down as traders price-in the probability of a no-Brexit deal. If it does, it will continue moving to yesterday’s low of 1.2500.
The XTI/USD pair continued to make big swings in overnight trading. The pair reached an intraday low of 51 and then started moving up. On the hourly chart, the price is between the lower and middle band of the Bollinger Bands. However, the pair’s recent swings are evident as shown in the hourly chart below. After getting to the oversold level, the pair’s RSI has moved up a bit to just below 40. XTI/USD will likely continue being volatile as traders continue to think about the demand for 2019.