GBP/USD, FTSE 100 Inventory Index Outlook Mired By ‘No Deal’ Brexit Fears

GBP/USD, FTSE 100, Brexit, UK-EU Commerce Negotiations – Speaking Factors:

• Danger urge for food notably soured throughout APAC commerce as coronavirus issues proceed to tug on investor sentiment
• Renewed ‘no deal’ Brexit fears could stop additional upside for GBP/USD because it approaches a key inflection level
• FTSE 100 index appears poised for additional declines with worth perched precariously above pivotal assist. Might a sustained sell-off be on the playing cards?

Asia-Pacific Recap

Coronavirus issues continued to dictate market sentiment all through the Asia-Pacific buying and selling session because the re-imposition of lockdown measures in Melbourne, Australia’s second largest metropolis, hampered regional risk-sensitive property.

The Australian Greenback retreated alongside the ASX 200 as Chinese language equities paused for breath after a historic surge above the 16,000 deal with. S&P 500 futures notably declined after day by day new circumstances of Covid-19 in Texas jumped above 10,000 for the primary time.

Information that the Trump administration could look to undermine the Hong Kong Greenback’s peg to the US Greenback might gasoline additional threat aversion within the upcoming session because the world’s two greatest economies proceed to go toe-to-toe.

Trying forward, feedback from European Central Financial institution Vice President Luis de Guindos could show market shifting while EIA crude oil inventories might assist to assist WTI costs ought to stockpiles decline greater than anticipated.

Market response chart created utilizing TradingView

UK Able to Go away EU on ‘Australia’ phrases

Though the UK’s restoration “has come sooner and has been quicker” than initially anticipated, Financial institution of England Chief Economist Andy Haldane confused there stays “an enormous quantity of uncertainty about what paths the economic system may take from right here”.

This uncertainty could also be compounded by studies claiming that Prime Minister Boris Johnson knowledgeable German Chancellor Angela Merkel that Britain can be prepared to go away the European Union on “Australia” phrases on the finish of the transition interval, if a ratified deal fails to get throughout the end line.

Supply – Workplace for Nationwide Statistics (ONS)

The introduction of an settlement mirroring the EU’s present commerce phrases with Australia – based mostly totally on World Commerce Group guidelines – can be economically crippling for each events, ensuing within the imposition of restrictive quotes and tariffs.

That being stated, the Prime Minister could also be making an attempt to melt the bloc’s place on a number of contentious points holding again the negotiations because the EU stays agency in its makes an attempt to garner a ‘degree taking part in subject’.

However, the continuing talks could proceed to behave as an anchor on the British Pound and regional threat property as buyers adapt to the distinct chance of a ‘no deal’ Brexit.

FTSE 100 Day by day Chart – Yearly Downtrend Capping Upside Potential

FTSE 100 index day by day chart created utilizing TradingView

When accounting for the UK’s elementary backdrop, it comes as no shock that the FTSE 100 index has grossly underperformed its main counterparts.

From a technical perspective, the outlook stays tilted to the draw back regardless of worth remaining briefly underpinned by Ascending Channel assist and the 50-day shifting common (6,105).

The event of the Momentum indicator reinforces the bearish tilt seen in latest worth motion and will doubtlessly encourage sellers, ought to it break by assist extending from early-April.

A detailed beneath the July low (6,084) is required to validate bearish potential, with a break beneath the psychologically pivotal 5,800 degree probably resulting in a resumption of the first downtrend.

GBP/USD Day by day Chart – 200-DMA Stifling Consumers

GBP/USD day by day chart created utilizing TradingView

The British Pound continues to profit from US Greenback weak point because it surged again above the 50-DMA (1.2460) after discovering assist on the psychological 1.2250 degree.

With the RSI strengthening above its mid-point, a push above the 200-DMA (1.2590) to check the April excessive (1.2648) could also be on the playing cards.

Nevertheless, a break of the June excessive (1.2813) stays comparatively ought to the RSI fail to interrupt above its key inflection zone into bullish territory above 60.

A swift reversal of the oscillator could ignite promoting strain, with a detailed beneath the 50-DMA (1.2460) doubtlessly carving a path again to the June low (1.2252).

— Written by Daniel Moss, Analyst for DailyFX

Observe me on Twitter @DanielGMoss