US Session Forex Brief, May 21 – GBP Finally Finds Some Bids as May Promises New Brexit Proposal
Skerdian Meta • 4 min read
Today is another boring day regarding the economic data. The most important event today was the speech from the Reserve Bank of Australia Chairman Lowe who sounded pretty dovish. The economy and employment are not in a good shape and the outlook would be worse if not taking into account a planned rate cut. He added that the RBA will take into consideration a rate cut in the June meeting, so it seems to me that this is a deal done after the failure to deliver a rate cut in the last meeting, before the RBNZ cut interest rates, by 25 basis points.
- OPEC+ Meeting Postponed – The original dates for the OPEC+ meeting in Vienna was scheduled for 25-26 June but it is believed that the Russian delegation has requested for the dates to be changed. According to Energy Intelligence’s senior correspondent, Amena Bakr the new meeting will be on 22-23 June or 1-2 July.
- UK House of Commons Leader, Leadsom Speaking – House of Commons leader, Andrea Leadsom, was commenting on Brexit earlier on saying that the UK must be able to leave EU with no deal if needed. She continues to support May’s Brexit deal and is ‘Actively considering’ to run for Tory leadership.
- OECD Cuts Global Economic Forecasts – The OECD cut global growth forecasts for this year from 3.3% to 3.2%. Below are some of the forecasts:
- 2020 global economic growth seen at 3.4% (unchanged)
- Global growth is to remain sub-par due to trade tensions
- 2019 US economic growth seen at 2.8% (0.2% higher)
- 2020 US economic growth seen at 2.3% (0.1% higher)
- 2019 China economic growth seen at 6.2% (-)
- 2020 China economic growth seen at 6.2% (-)
- 2019 Eurozone economic growth seen at 1.2% (0.2% higher)
- 2020 Eurozone economic growth seen at 1.4% (0.2% higher)
- 2019 Japan economic growth seen at 0.7% (0.1% lower)
- 2020 Japan economic growth seen at 0.6% (0.1% lower)
- 2019 UK economic growth seen at 1.2% (0.4% higher)
- 2020 UK economic growth seen at 1.0% (0.1% higher)
- China Threatens Back – The Chinese state media Xinhua released a statement earlier where it said “Make no mistake, China is not bluffing on the ability to fight back”. Statement below:
“Facing an aggressive U.S. protectionist stance, China has demonstrated full readiness to fight back by announcing tariff countermeasures. China has reiterated that necessary counterstrikes will be rolled out if the United States continued to act willfully. Make no mistake, China is not bluffing.”
No doubt China will also suffer bruises during the fight, but further U.S. unilateral protectionist moves would only boost China’s morale and patriotism to unite as one formidable force to counter any challenges, as seen repeatedly in China’s history. The United States shutting its door to Chinese products and investors will hurt involved players, but will help push China’s economic transition to become a self-made global innovator.
- UK CBI Industrial Order Expectations – The CBI industrial orders expectations indicator has been weakening for months and last month it fell to -5 points, missing expectations of 3 points. Today’s report was expected to get a bit worse and come at -6 points, but it missed expectations again and it deteriorated further to -10 points, so the industrial sector is not doing good in Britain.
- Eurozone Consumer Confidence – Consumer sentiment has been weakening in the Eurozone and it turned negative at the end of last year. It has been holding on at the -6 and -8 range in the last several months. Today’s report was expected to show that the consumer confidence remains unchanged at -8 points this month, the same as in April, although it improved very slightly coming at -7 points.
- US Existing Home Sales – The existing home sales have been sort of volatile in recent months, increasing to 5.51 million sales in February which was revised lower to 5.49 million last month, while in March home sales touched 5.21 million. They were expected to increase again to 5.35 million in April, but today’s report missed expectations showing that sales declined further to 5.19 million.
- FED Speakers – The economic data is light again today, especially in the US session but there are a few FED speakers on schedule as listed below:
- Federal Reserve Bank of Chicago President Charles Evans speaking at 9:30 AM ET/1330 GMT
- Federal Reserve Bank of Boston President Eric Rosengren speaks at 7 PM ET/2300 GMT. The topic is “Assessing Risks to our Financial System” at the Financial Markets Conference, in Florida.
- The main trend remains bearish
- The downtrend has picked up pace in the last 2 weeks
- The pullback higher is complete
- Fundamentals are bearish
Stochastic is overbought so the pullback is complete
GBP/USD has turned bearish and in the last two weeks the bearish trend has been picking up pace as it is showing by the 20 SMA (grey) which is pushing this pair down. Although we saw a jump earlier today after comments from Theresa May’s spokesperson who said that May will bring new proposals to the Parliament later today. But the jump ended near the 50 SMA (yellow) and now this pair is reversing down. If there is no breakthrough, then I expect the situation to get even more bearish for the GBP.
So the GBP finally made a small bullish move today which has already ended. Although we might see a big reversal from this downtrend if Theresa May brings something substantial to the Parliament in abut half an hour. If not, then the GBP will head even lower towards 1.20 because this is the last try for May before she gets booted off.