Today has been a pretty strange day in forex, especially for the GBP and GBP traders. Last night, the UK Prime Minister lost the vote on contempt in the British Parliament. This is a sign  that Theresa May’s Brexit deal won’t pass the Parliament vote next Tuesday, so that is supposed to be negative for the GBP.

In fact, the GBP lost nearly 200 pips yesterday in the US session after it had gained more than 100 pips during the European session. Today, GBP/USD surged around 130 pips higher so far even though the services PMI report was pretty horrible. So, what’s the story behind this move today?

Well, Theresa May said last night that if the Brexit deal doesn’t pass the Parliament vote next week, the UK might as well end up without Brexit altogether. The timetable doesn’t allow for new talks between the UK and EU regarding another deal. Today, the UK Trade Secretary Liam Fox repeated the same comments, saying that it becomes increasingly probable that the UK ends up with no Brexit, meaning that Britain will be forced to stay in the EU since the outcome of a no-deal Brexit scenario will be much worse than staying within the EU. Yesterday, a European Court of Justice aide said that the ECJ will likely rule that the UK can revoke Article 50, which is the withdrawal act, without consent from other EU members, so it seems like the stars are aligning for the UK to remain in the EU. That might not happen, or it might, who are we to judge, but the market jumped higher on those rumours.

The European Session

• Eurozone Final Services PMI – The day started with the services PMI reports from the European countries. We saw a small improvement in the service sector across the continent as Spanish services PMI came at 54.0 points, against 53.9 expected. French PMI came at 55.1 points against 55.0 points expected and the Italian services PMI climbed to 50.3 points from 49.2 points previously. The German services PMI remained unchanged at 53.3 points, but the figures from the other European countries helped move the whole Eurozone services PMI to 53.4 points against 53.1 points previously.
• More Rhetoric on Oil from OPEC Countries – Kuwait commented early this morning that OPEC+ countries haven’t yet discussed the proposal to cut production. Later on, the Oil Minister of Oman said that OPEC+ countries are discussing production cuts only for the next 3-6 months. He added that $50/barrel is not a fair price. There’s a lot of uncertainties heading into the OPEC+ meeting, so it is not certain whether they will actually come to an agreement or not.
• UK Services Head for Contraction – The UK services PMI was supposed to increase to 52.5 points from 52.2 points previously, but it fell to 50.4 points which is pretty close to contraction. The sub-components of this report were even worse. They were some of the weakest numbers in a long time.
• BOJ Kuroda Speaks – The Chairman of the Bank of Japan held a speech this morning where he said that the BOJ will take suitable policies next year and they will watch for local, foreign trends while deciding on policy. They don’t have room to move a finger in my opinion; don’t expect a rate hike from the BOJ guys.
• Possibility of No Brexit for UK’s Fox – UK Trade Secretary Liam Fox repeated Theresa May saying that there is a possibility that the UK ends up with no Brexit if the British Parliament doesn’t pass Theresa May’s Brexit deal. He added that backstop is a “calculated risk”.
• Eurozone October Retail Sales – Eurozone retail sales increased by 0.3% in October against 0.2% expected. Although, the September figure was revised down to -0.5% from 0.0%. The annualized retail sales also came lower at 1.7% against 2.0% previously.
• ECB Might Withdraw Stimulus – According to Reuters, ECB policymakers are debating ideas to gradually start removing the economic stimulus. Some policymakers think that it would be better to only hike the deposit rate first which stands at -0.40%, as opposed to the refinancing rates.

The US Session

• Theresa May Speaks in the British Parliament – UK Prime Minister May spoke in the UK Parliament a while ago saying that she is still listening to worries from colleagues on the backstop and considering the way to move forward. The backstop will be the main issue which will kill the Brexit deal if it gets voted down in the Parliament on December 11.
• BOC Overnight Rate – The Bank of Canada raised interest rates from 1.25% to 1.50% in July and again to 1.75% in October. The meeting is today, but they are widely expected to keep rates on hold this time.
• BOC Rate Statement – The statement will be released together with the interest rate decision. It will be interesting to see what the BOC thinks about the economy now, after the US, Mexico and Canada signed the USMCA (new NAFTA) deal last weekend in the G20 summit.
• Today’s US Data Is Postponed for Tomorrow – Today is a mourning day in the US in memorial of ex-President George H.W. Bush. So, the economic data that was supposed to be published today is postponed for tomorrow.

Trades in Sight

Bullish EUR/GBP

1. The trend is bullish
2. The retrace lower is complete
3. Candlesticks pointed to a bullish reversal
4. The 100 SMA provided solid support

We missed the chance to buy at the 100 SMA today

Yesterday we went long on EUR/GBP from the 100 simple MA (green). That proved to be a good trade as that moving average reversed the price, but the 100 smooth MA (red) is the ultimate support indicator for this pair. Today, the price dipped again and it reached the 100 smooth MA as GBP surged on ‘no Brexit’ rumours. The 100 SMA provided solid support once again and the candlestick formations pointed to a bullish reversal. But,  we missed the opportunity. Although, this move is still not over as it has lots of room left to run higher.

In Conclusion

The GBP is reversing down now after it flushed some weak stops above. This has been the story for GBP pairs and GBP traders for a long time now. The CAD is also lower today as Oil slides on OPEC rumours, although OPEC+ might decide to cut production this week, so don’t be too sure about the CAD either, until that meeting is over.