Sterling Falls as the UK Braces for a New Post-Brexit Normal

There was a divergence between the US and Chinese stock market today. Chinese stocks had their worst day in almost five years as investors continued to worry about the spreading coronavirus. They are worried that the disease will have a negative impact on the country’s economy. Just today, Hong Kong closed most of its border crossings with mainland China in an effort to curb the virus. China has accused some countries of overreacting to the outbreak. The country blamed the US for spreading fear instead of offering assistance to the country. Just last week, Wilbur Ross, the US trade secretary said that the virus would be beneficial to the US economy.

US futures rose today as investors appeared to downplay the virus. They are possibly looking ahead to corporate earnings. This week, more than 80 companies in the S&P500 are expected to report. Among the key companies to watch will be General Motors, Alphabet, Sysco, and Ralph Lauren among others. The earning season so far has been good. About 226 companies in the S&P500 have already reported. 70% of these companies have beat analysts’ consensus while 10% of them have met. 20% of these companies have missed the consensus estimates. 

The British pound declined sharply today as the market reacted to the new normal. The UK left the European Union on Friday. The country will now enter a period of negotiations as it tries to get a good deal with the EU. Boris Johnson has said that the UK will not be bound by EU’s rules. On the other hand, the EU chief negotiator, Michel Barnier has insisted that such rules must apply. Meanwhile, the market received positive PMI data from the UK. In January, the manufacturing PMI data rose to 50. This is the first time it has reached this level since May last year.

GBP/USD

The GBP/USD pair declined by more than 1% to a low of 1.3054. This was the lowest the pair has been since Friday. The price is along the lower line of the Bollinger Bands. It is also below the 14-day and 28-day exponential moving averages. The RSI has moved to the oversold level of 30. The signal and main line of the Stochastic Oscillator have moved to the oversold level. The pair may continue moving lower as uncertainty over Brexit continues.

EUR/USD

The EUR/USD pair declined slightly even as the market received positive PMI data. In Germany, manufacturing PMI increased from 43.7 to 45.3 while in Italy, the PMI increased from 51.0 to 51.1. The pair declined from a high of 1.1095 to an intraday low of 1.1057. The 14-day and 28-day EMA have made a bearish crossover while the RSI has moved from a high of 82.23 to a low of 45. The pair may continue to decline during the American session.

AUD/USD

The AUD/USD pair declined to an intraday low of 0.6682 as the market reacted to the coronavirus. This was the lowest level since October 3 last year. The price is below the 14-day and 28-day exponential moving averages. The RSI and Stochastic Oscillator have moved to the oversold level. The signal and histogram of the MACD have continued to decline. The pair may continue to decline as the coronavirus continues to spread.