HomeContributorsFundamental AnalysisSterling Drops Sharply After Brexit Vote Is Postponed

Sterling Drops Sharply After Brexit Vote Is Postponed

Sterling declined to almost a 20-month low overnight after Theresa May postponed the planned Brexit vote which was supposed to happen today. She did this because her proposal was unlikely to happen. Negotiations to address the key issues – such as the backstop – will now resume with the European Union. In response, Donald Tusk, the European Council President said that the region was ready to work with the UK on having a good deal. However, May will restart the negotiations at a place of weakness after failing to secure the required votes. Today, the Brexit debate will continue even as traders receive the employment numbers.

Japanese stocks declined to a 20-month low after the volatile Wall Street session. Yesterday, US stocks declined sharply before closing in the green. At the same time, the S&P volatility index rose to a multi-month high, a sign that volatility was increasing in the market. The same sell-off happened in Australia, Hong Kong, Shanghai, and Seoul. The economic data to watch from Japan will be the machine tool orders and the assessment of big manufacturers’ performance.

The price of crude oil declined in overnight trading as traders continued worrying that the cuts announced by OPEC will not go far enough to rebalance the market. The implication of this is that producers will continue overproducing and flooding the market with oil. Traders are also starting to worry about the increased production from the United States. Early this year, the country passed Saudi Arabia and Russia to become the biggest oil producer. Last week, data from the EIA showed that the country had become a net oil exporter for the first time in decades.

EUR/USD

The EUR/USD pair declined sharply in overnight trading after Theresa May abandoned the Brexit vote yesterday. The pair dropped to an intraday low of 1.1350. In the Asian session, it recovered a bit to a high of 1.1370. Today, traders will receive the ZEW sentiment data from Germany. The current price is below the 25-day and 50-day EMA while the Average True Range has declined sharply as shown below. The RSI has moved slightly higher to the current 40. In the short term, the price will likely continue moving up before continuing the downward trend.

XTI/USD

After rising sharply yesterday, the price of crude oil declined in overnight trading as traders continued their worry about supply. The XTI/USD pair declined to 50.75. On the four-hour chart, the pair’s price was below the 50-day and 25-day EMA while the RSI has moved to a low of 43. This is lower than the 60 level it was before. The pair’s price will likely continue to wait for inventory data, which will be released later today.

GBP/USD

The GBP/USD pair declined sharply overnight after Theresa May cancelled the planned vote for Brexit. The pair reached an intraday low of 1.2505. The price is below the 25-day and 50-day EMA. The Relative Vigor Index declined sharply while the RSI is trading below the oversold level of 30. The pair’s volatility will likely continue as traders watch the latest developments on Brexit.

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