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Tossed by waves of political sentiment

Late last night the House of Representatives passed concessions on a major increase in defence spending

Oil price hits its highest in six months

 

This week started with the threat of a US Government shutdown.

Late last night the House of Representatives passed concessions on a major increase in defence spending and a hard-line immigration bill. But Senate Democrats said they would likely block the measure unless President Donald Trump and Republicans include protection for young immigrants.

An impasse could result in Trump celebrating his first anniversary in office with the first shutdown in four years, despite his party holding a majority in both houses.

After reports of the vote we saw continued, but muted, Dollar weakness, pushing the GBP/USD pair back above $1.39 and EUR/USD nearer the $1.23 resistance level.

UK Prime Minister Theresa May spent yesterday, 18 January with French President Emmanuel Macron. The latter warned May that Britain must pay into the European Union’s budget and accept Brussels’ laws to secure continued access to the single market for UK financial services after Brexit.

There were signs that the French could welcome a transition deal following discussions on immigration through Calais, with Britain suggesting it would support increased security costs (through a £44 million payment for the Bayeux Tapestry loan). UK Foreign Secretary Boris Johnson has also floated an idea of a bridge across the Channel to improve transport links with France linking the two nations. This pointed to a “no deal” Brexit being less likely.

Despite remaining range-bound, the Pound is ending the week up against the Euro, currently trading 1.1346. Today’s UK retail sales data could support further buying if they beat analysts’ expectations of a decline month on month.

As the week is drawing to an end, we find ourselves where we started, having ridden the waves of political sentiment.

EUR/USD $1.2255 (+$0.0018)

EUR/USD opened at $1.2235 around midway of Thursday’s range and fell to $1.2230 after the stopgap funding bill was passed by the House and progressed to the Senate for a vote, which was delayed until later on this afternoon/evening. The pair found support as the session wore on, rising to $1.2270. The market is off the highs as we head into the European open, trading at $1.2255. From a technical view, we look for resistance at Wednesday’s multi-year high of $1.2322 before the 18 December (2014) high at $1.2352. On the downside, yesterday’s low at $1.2163 may offer some support before the 8 September high at $1.2092.

GBP/USD $1.3908 (+$0.0017)

The cable opened in Asia at $1.3894, towards the upper end of Thursday’s range. We began the session on the back, falling to today’s low of $1.3886 on the aforementioned US stopgap bill passing through the House. The pair found support as the session wore as the vote in Washington was delayed, rising to today’s high of $1.3923. The market is off the highs as we head into the European open, trading at $1.3908. From a technical view, we look for resistance at Wednesday’s high before at the 6 April low at $1.4004. On the downside, yesterday’s low at $1.3755 and Monday’s low at $1.3720 are in focus.

USD/JPY ¥110.88 (-¥0.21)

The pair opened in Asia at ¥111.09, around midway of Thursday’s range. We began the session on the front foot, seeing a slight rise to today’s high at ¥111.12. The pair came under pressure as the session wore on, falling to today’s low of ¥110.77, as US Treasury yields ascended above 2.63%, its highest level since 2016. The market is off the lows as we head into the European open, trading at ¥110.88. From a technical view, we look for support at yesterday’s low at ¥110.68 ahead of Wednesday’s low at ¥110.18. On the upside, yesterday’s high at ¥111.48 and Monday’s high at ¥111.18 are in focus.

GBP/EUR €1.1343 (-€0.0005)

GBP/EUR opened in Asia at €1.1351, towards the upper end of Thursday’s range. We began the session on the front foot, seeing a slight rise to today’s high of €1.1354. The pair came under pressure as the session wore on, falling to today’s low of €1.1339. The market is off the lows as we head into the European open, trading at €1.1343. From a technical view, we look for resistance at the 18 December high at €1.1372 and 14 December high of €1.1413. On the downside, yesterday’s low at €1.1313 may offer support before Monday’s low at €1.1221.

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