Sterling pauses as Theresa May changes strategy

The price of crude oil was little moved in overnight trading after data from the EIA showed increased inventories. Over the past week, the inventories jumped by 7.9 million, which was higher than the 425K drawdown that investors were expecting. It was also higher than the previous week’s inventories of 2.8 million barrels. The Cushing crude inventories were at 201K, which was lower than the previous week’s 541K. On Tuesday, data from API showed that inventories were at 2.93 million barrels. This month, traders will be focusing on the OPEC meetings, which will happen in Vienna where the members will deliberate on whether to increase or reduce inventories.

Sterling remained close to yesterday’s highs as Theresa May kicked off negotiations with Labor leader, Jeremy Corbyn on how to address the Brexit crisis. The two parties hailed the talks on Wednesday as being constructive. A cabinet minister signaled that the government could accept Labour’s central demand of remaining in the customs union with the EU. This would limit the UK’s ability to negotiate trade deals with other countries. In protest, two cabinet ministers resigned. In a meeting with other EU leaders next week, Theresa May is expected to ask for another Article 50 extension.

In the United States, the S&P 500 notched the fifth day of gains as investors cheered the ongoing trade talks between the United States and China. The index gained by 0.2% and ended near the highest level since October 9. The rally was led by chip makers like Advanced Micro Devices (AMD), which gained by 8.5%. This is because these companies will probably have big wins if the talks with China yield results. Today, Donald Trump will meet with China’s Liu He, who is in Washington for three day of talks.

EUR/USD

The EUR/USD pair was little moved in overnight trading, as investors waited for key manufacturing data from Germany expected later today and the official employment numbers from the US. The pair is now trading at 1.1240, which is slightly higher than the week-to-date low of 1.1180. On the chart below, the pair is slightly lower than the upper line of the Bollinger Bands and is along the 23.6% Fibonacci Retracement level. The Relative Vigor Index (RVI) has continued to gain. The key levels to watch will be the 38.2% Fibonacci retracement level of 1.1280 and the previous low of 1.1185.

GBP/USD

The GBP/USD pair was little moved as traders waited for the outcome of the new talks between the government and Labor. The pair is now trading at 1.3170, which is much higher than where it started the week. On the four-hour chart, the price is slightly lower than the lower line of the Bollinger Bands. The Average True Range indicator, which is a measure of volatility in the market declined slightly while the money flow index declined from 73 to 50. The pair will likely be volatile as the outcome of these talks start to emerge.

SPX500

This year, the S&P 500 index has been on a major upward trend. It has gained by almost 15%. Yesterday, the index reached a high of $2885, which is close to the 7-month high. On the four-hour chart, the price is above the 100-day and 50-day moving averages while the RSI has moved from the overbought level of 70. The On-balance Volume has remained slightly lower. While the index could continue moving upwards, there is also a likelihood that it could rebalance and decline to about the 100-day EMA level of $2800.



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