Brexit Still In Question, Pound Jumps
Brexit Negotiations – Going “The Extra Mile”
by Bogdan Giulvezan
The President of the EU’s Executive Commission, Ursula von der Leyen, and British Prime Minister Boris Johnson had set Sunday, Dec. 13 as the deadline for negotiators to reach an agreement in the thorny Brexit trade deal. But just as many other deadlines before it, this most recent one failed to deliver a much-anticipated conclusion.
UK Business Secretary Alok Sharma mentioned that people expect them “go the extra mile”, thus it looks like the two sides are not yet ready to part ways and to walk away without an agreement. Negotiations will continue, in order to avoid a stormy exit at the end of the month but Prime Minister Johnson didn’t sound too optimistic on the forecasts of a smooth solution.
Sharma continued by saying: “Any deal that we get with the EU has to respect the fact that we are a sovereign country, an independent country and that’s the basis on which we will do a deal if there is a deal to be done”.
Key Events for the Week Ahead
The first two days of the week are lackluster in terms of economic events but action picks up Wednesday, December 14 with a series of Purchasing Managers’ Indexes (PMIs). At 8:30 am GMT the German Manufacturing and Services PMIs will be released, showing the opinions of purchasing managers from the respective sector about the business conditions, including employment, inventories, production, prices, and more.
At 9:00 am GMT, the Manufacturing and Services PMIs for the entire Eurozone will be released, but because the German data will be already out, this release tends to have a lower impact. As a rule of thumb, numbers above forecast are indicative of optimism and usually strengthen the Euro.
Across the pond, the US Retail Sales will be released Wednesday at 1:30 pm GMT, followed at 2:45 pm GMT by the US Manufacturing and Services PMIs and later in the day (7:00 pm GMT) by the FOMC Statement and Economic Projections. Half an hour later the FOMC will hold the usual Press Conference, where Federal Reserve Chair Powell will read a prepared statement and will answer journalists’ questions. The rate is not expected to change but this cluster of events usually creates market volatility. The rest of the week lacks major events for the Euro and US Dollar.
Chart Analysis – EUR/USD
The US Dollar is on the back foot at the start of the week, with the pair trading currently around 1.2150, close to the previous top (1.2175). The next major hurdle is located at 1.2500 but such a climb is not very likely to happen in the short-term.
The overall bias is bullish but the RSI is very close to overbought on the Daily charts and the MACD lines are close together, showing contraction. It’s pretty safe to say that upside momentum is declining, thus we may see a descent into the minor support at 1.2060 during the week. Keep in mind that Wednesday is a big day for both currencies in the pair, and one that could affect price action significantly.
