In the last couple of weeks we have seen increased uncertainty in financial markets. In recent months, the situation has been driven by the trade war and its rhetoric, which has gone in favour of the USD, apart from retracing periods. But in recent weeks the uncertainty has increased as we edge closer to the end of most major fundamental events which have affected markets recently, but without any solution. The Reserve Bank of New Zealand has turned really bearish recently cutting interest rates twice, but today they dialed back on monetary easing, which turned the NZD bullish after the strong bearish move yesterday.

In UK, the opposition and some rebels from the Conservative Party voted to make the no-deal Brexit scenario illegal and the UK Supreme Court ruled the prorogation of the Parliament as unlawful yesterday. But, Boris Johnson is pushing for Brxit on October 31 no matter what, as he repeated earlier today. That has left GBP traders puzzled. The trade war has escalated but we keep hearing positive comments, such as comments from China this morning which improved the sentiment for a while, although they didn’t offer anything new, so it still remains uncertain if US and China will reach an agreement. So, nothing is sure right now in financial markets and they keep flipping side day to day.

The European Session

• UK Junior Brexit Minister Speaking – The UK Junior Brexit minister Duddridge commented early this morning that they are reopening the withdrawal agreement. He added that the Government’s plan A is to navigate a way around the Benn Act by getting a Brexit deal. What’s the plan B then?
• The UK Will be Out by October 31 for Boris Johnson – UK PM Johnson was also speaking via Reuters today, saying that he is convinced UK will leave EU on October 31. Good chance we will get a deal despite the surrender act. Can’t hide from an election forever. If there is no Brexit deal we will simply come out of the EU. After coming out, we will come to the electorate as a moderate one nation party. He also takes all threats to lawmakers very seriously and Cabinet Office is working hard to address that.
• Barnier Leaves the Door Open for a Possible Deal – EU’s Brexit negotiator Michel Barnier commented after Boris Johnson. He said on Reuters that we are still ready to work on any new legal and operational proposals on Brexit from Britain. Earlier on, Johnson said that the Brexit minister Barclay will go to Brussels tomorrow with EU’s Barnier. Very long way to go to secure Brexit deal. Barclay to go tomorrow for talks with Barnier. So, there’s still hope for a deal, albeit vague.
• Eurozone M3 Money Supply and Private Loans – Private loans in the Eurozone have been increasing in the last several months from 3.2% YoY to 3.3% and to 3.4% in July. Although, they were expected to remain unchanged at 3.4% in August and they didn’t change. M3 money supply has also been increasing from 4.5% back in March to 5.2% in July, which was revised a tick lower to 5.1%. Today’s report for August was expected to remain unchanged at 5.1%, but M3 money supply jumped by 5.7% that month.

The US Session

• US Q2 Final GDP – The final GDP revision for Q2 in the US was released a while ago and it remained unchanged from the previous reading at 2.0%. GDP YoY also remained unchanged at 2.3% vs 2.3% in the 2nd estimate. GDP YoY also remained unchanged at 2.3% vs 2.3% in the 2nd estimate. Personal consumption ticked down to 4.6% from 4.7% in the 2nd reading. Business investment turned more negative at -1.0% from -0.6% in 2nd reading. Exports came at -5.7% vs -5.8% in 2nd reading, imports ticked lower to 0.0% vs +0.1% in 2nd reading. Corporate profits were revised much lower at 3.7% from 5.1% in the 2nd reading. GDP price index remained unchanged at 2.4% vs 2.4% in 2nd reading, but core PCE moved higher to 1.9% vs 1.7% in 2nd reading. The revision down in business investment made it the worst quarter since Q4 2015. But at least inflation picked up.
• US Jobless Claims – The weekly US initial jobless claims for the week of September 21 came in at 213k against 212k estimated. 4-week average for initial claims came at 212k from 212.75k last week. Continuing claims came at 1650k against 1666k estimated. The four-week average was 1665.75k versus 1678.5K last week. The largest increases in initial claims for the week ending September 14 were in California (+3,879), Georgia (+1,563), Florida (+1,530), South Carolina (+1,246), and New York (+1,048).
• US Wholesale Inventories – Wholesale inventories have been increasing by 0.2% in the last two reports, but the last one which was for July was revised lower to 0.1% today. For August, wholesale inventories were expected to show a 0.1% buildup once again, but they increased by 0.4% instead. Retail inventories remained flat at 0.0% against 0.1% expected.

Trades in Sight

Bullish GBP/USD

• The trend has turned bearish
• The pullback higher is complete
• The 20 SMA is providing resistance
• Fundamentals have turned dovish again

GBP/USD is finding resistance at the 20 hourly SMA now

A while ago we decided to go short on GBP/USD. This pair has turned bearish this week as Boris Johnson keeps pushing to pull UK out of the EU on October 31 with or without a deal. The uncertainty has increased as well. During the Asian session today, this pair retraced higher, but the retrace ended at the 20 SMA (grey) on the H1 chart and reversed back down. But, we have been seeing another retrace in the last few hours in this pair, although the 20 SMA is providing resistance once again. the previous candlestick also closed as a doji which is a reversing signal, so we decided to take that chance and sell GBP/USD.

In Conclusion

So, the uncertainty continues in financial markets. We’ve been hearing positive comments from the US and China recently but nothing substantial or new for that matter. The opposition and the administration in the UK are trying everything to stop or postpone Brexit but Johnson is keeping his hard line. Some central banks have played down their tones recently, but the global economy keeps weakening, so traders are left puzzled about where we will be heading next.