Forex Signals US Session Brief, November 13 – Great UK Earnings Report but Markets Remain on Hold for Brexit
Skerdian Meta • 4 min read
Brexit news has been hitting the wires today since early in the morning. We heard rumours from the EU and from British Politicians that a deal is out of reach this week or in November, and then we heard more rumours that a solution could be found this week on the Irish backstop. But if there is one thing that we have learned during these last two years, it is that we should believe nothing until everything has been signed and sealed. That’s what the market is doing as well. Until a month ago, GBP pairs used to jump higher on every Brexit-related rumour, but now the market is ignoring them all.
The earnings report from the UK was pretty impressive today. The pace of the increase in wages and salaries grew further to 3.0% 3M/Y against 2.7% previously. This is the third month that they increased, so the declining trend is over and growth is near the highs now. Non-bonus earnings increased by 3.2% which is faster than including bonuses and that means that the financial companies and firms are holding on, since most of the bonuses in UK come from the banking and financial sector. So perhaps financial businesses are taking flight out of the City of London. The situation doesn’t look very bright in Europe either with the business sentiment in Germany and the Eurozone declining further. At least the ECB is starting to accept the economic slowdown in Europe.
The European Session
- ECB’s Praet Accepts the Economic Slowdown – The Chief Economist at the European Central Bank commented early this morning in London that the Eurozone economy has slowed but that is a result of a global momentum decline. He added that significant monetary policy stimulus is still needed and the ECB will proceed at a very gradual pace regarding monetary tightening. Dovish words for the Euro.
- Swiss PPI MoM – The producer price index grew by 0.2% in Switzerland against 0.1% expected on a monthly basis. The annualized number came at 2.3% against 2.2% expected, but that’s still softer than the 2.6% we saw last month.
- Brexit Deal, No Brexit Deal – Rumours started coming out early in the morning with Reuters publishing a report where the EU basically sees no chance of a deal this week which means no deal in November. Then we had the UK Foreign Secretary Jeremy Hunt comment that 5% of the issues still remain and he doesn’t know when they will be resolved. May’s cabinet Secretary Lidington followed up saying that it is possible to reach a deal within 24 hours but we are not there yet. Brexit Secretary Dominic Raab added that he is confident the UK will make progress. Boris Johnson took his turn trying to scare the markets saying that a Brexit deal will be struck but it will mean surrender for the EU and that the UK is doomed to remain in the customs union as a colony. Tough words there, BoJo. UK Trade Minister Liam Fox took his turn saying that there’s no Brexit deal yet and there are still issues with the Irish border. In the last couple of hours, rumours became more positive with comments from the UK cabinet that we are now closer to a deal than we were yesterday. The Sun’s political editor closed off the Brexit marathon for the time being with rumours form the Government about a possibility to sign off on the Brexit deal tomorrow. Tomorrow is the last date for a November deal.
- UK Unemployment Rate – The unemployment rate ticked higher to 4.1% today, against 4.0% expected. The unemployment claims also increased to above 20K. This is the first increase in the unemployment rate this year, but it is not a big deal since it doesn’t change the trend.
- UK Average Earnings Index – Earnings increased to 2.7% last month from 2.5% in the UK. This month, they increased to 3.0% as expected, while non-bonus earnings increased by 3.2% which is even better. Great earnings figures in Britain.
- ZEW Economic Sentiment – The German ZEW economic sentiment came at -24.1 point against -26 expected, while the sentiment in the Eurozone declined further to -22.0 points from -19.4 points previously. Very bad figures which are not helping the Euro.
- OPEC Sees Demand Declining Faster Than Expected – OPEC released its monthly report. They see demand fall faster than expected in 2019 and productions from non-OPEC countries to increase faster than the global demand. Good words for normal people who use petrol, but negative for Oil buyers.
The US Session
- Trump Likes French Wine – US President Donald Trump tweeted a while ago that France makes good wine but so does the US. The problem is the tariffs from the French which makes it difficult for US producers to sell their wine in France. He ended it with the words “Must Change”. Let’s see what he has in mind.
- Irish Backstop To Be Ready Today – According to a Bloomberg headline, the UK cabinet should receive the text of the Irish border backstop to be completed today so they can sign it off or reject it.
- FED Members To Speak In the US Session – We have some speeches scheduled today from a number of FED members such as Brainard, Harker and Kashkari, although I don’t expect much price action from their speeches unless they sound really dovish.
Trades in Sight
- This pair has been on a bearish trend in the last three weeks
- The retrace up is complete
- The 50 SMA is providing resistance
This pair should resume the bearish trend soon
EUR/CHF has turned pretty bearish in the last three weeks, losing around 250 pips from top to bottom. Although, it has retraced higher today and on the H1 chart time-frame it has completed the retrace. The stochastic indicator is overbought and the 50 SMA (yellow) is providing resistance on top, so we are thinking about getting short on this forex pair.
The rumours about a Brexit deal are piling up and with the November deadline being tomorrow, we might actually get a confirmation from the UK and the EU. Whatever the case with the Irish backstop, if a deal is confirmed, then the GBP should surge which will pull up the Euro as well for some time. So, keep an eye on our news feed to see for Brexit news and probably get some good pips on that move if it happens.