GBPUSD Reverses on Brexit Latest. USDCAD Falls on Poloz After GDP
Asia Pacific Market Open Talking Points
- GBP/USD clears resistance on latest Brexit developments
- Canadian Dollar brushes aside GDP data for BoC’s Poloz
- S&P 500 gains to be tested on Fed, bearish sentiment signals
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FX News Tuesday
The British Pound was the best-performing major on Tuesday ahead of this week’s Bank of England rate decision. Though its appreciation may have been due to Brexit-related fundamentals. UK Foreign Secretary Jeremy Hunt warned against a change of leadership, a rising concern for Prime Minister Theresa May, as it could delay the EU-UK divorce. Avoiding the extra uncertainties that this may pose increases Sterling’s relative appeal.
Weakness in the US Dollar ahead of Wednesday’s FOMC rate decision also aided to GBP’s cause. Most of the declines in the Greenback occurred during European hours where a slew of better-than-expected regional economic data crossed the wires. This included rosy Eurozone GDP, German CPI and as Italy’s economy slowly exited the technical definition of a recession. EUR/USD closed above near-term resistance.
GBP/USD Technical Analysis
On the daily chart, GBP/USD broke above a near-term falling trend line going back to March. This followed a bottom after falling under the rising support line from the end of December. Confirming another close to the upside opens the door to overturning GBP’s recent downtrend. Otherwise, turning lower places near-term support between 1.2866 and 1.2888.
GBP/USD Daily Chart
Chart Created in TradingView
Despite initially falling on softer-than-expected local GDP data, the Canadian Dollar was another solid performer on Tuesday. Rosy commentary from Bank of Canada Governor Stephen Poloz later in the day boosted CAD. He expects the economy to accelerate in the second half of this year, undermining dovish bets that were fueled by February’s disappointing growth figures.
Wednesday’s Asia Pacific Trading Session
The New Zealand Dollar is off to a rocky start in early Wednesday trade following a weaker-than-expected local jobs report. Accompanying a decrease in the unemployment rate was the smallest labor force participation reading since the second quarter of 2017. This suggested that this may be have been as a result of discouraged workers exiting the workforce.
Aside from that, Wednesday’s Asia Pacific trading session is lacking notable economic event risk. This places the focus on risk trends. S&P 500 futures are pointing notably higher following rosy Apple earnings. But market optimism will be tested on the Fed rate decision. Meanwhile, sentiment readings warn. that the S&P 500 could still top.
Want to learn more about how sentiment readings may drive the S&P 500? Tune in each week for live sessions as I cover how sentiment can be used to identify prevailing market trends!
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— Written by Daniel Dubrovsky, Junior Currency Analyst for DailyFX.com
To contact Daniel, use the comments section below or @ddubrovskyFX on Twitter