EUR/USD Advances Quietly In The Channel

  • EUR/USD is sticking to its well-known ranges, but setting higher lows and higher highs.
  • The Brexit turmoil is mitigated by progress on Italy and calm markets.
  • A light calendar leaves room for political headlines to dominate.

EUR/USD is trading in the upper half of the 1.1300 handle, similar to previous days. The pair stabilized alongside stock markets, which temporarily dropped sharply on Monday.

The most significant story in markets is Brexit. The UK government decided to pull the vote on the withdrawal deal and try to renegotiate some assurances from the European Union on the Irish backstop. The move came after it became clear that the agreement will suffer a crushing defeat. EU leaders have rejected any substantial changes to the accord. Prime Minister Theresa May will visit The Hague and Berlin to discuss the options with her counterparts.

The announcement sent GBP/USD to the lowest levels in 20 months and also adversely impacted the Euro, which lost a few dozens of pips but then recovered.

Italy remains high on the European agenda. Italy’s Deputy PMs Matteo Salvini and Luigi di Maio refuse to discuss a budget deficit of under 2%, but there are reports of readiness to compromise. Italian headlines will likely move the Euro.

Positive signs are also seen in the US-Chinese trade talks. China’s Vice Premier Liu He held a conversation with US trade representative Robert Lighthizer and Treasury Secretary Steven Mnuchin. The discussion came despite a row over the arrest of Huawei CFO Meng, a move that aggravated relations between the world’s two largest economies. They strive to strike a deal by early March.

The economic calendar is quite light, but there are a few noteworthy events. The German ZEW Economic Sentiment is projected to remain in negative territory, indicating pessimism about German growth. The publication follows the Sentix Investor Confidence released on Monday, which fell to negative territory with -0.3 points.

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