The British pound strengthened its position after yesterday's slight downward correction against the backdrop of a meeting between French President Emmanuel Macron and British Prime Minister Boris Johnson.
In the morning, the French leader announced that the EU would continue to prepare for all the scenarios, including Brexit without an agreement. However, the EU would prefer an orderly exit. During the meeting, which took place today in Paris, both Macron and Johnson agreed that clarity on Britain's exit from the EU should appear within 30 days. Johnson also agreed on this with the German chancellor.
First of all, we are talking about resolving the problem of "back-stop", because of which the parties can't agree on anything. The dispute between the parties on the border of Northern Ireland and its territorial division did not allow UK's former Prime Minister Theresa May to achieve a solution to the problem regarding Brexit.
The President of France noted that, despite the likelihood of new proposals on the Irish border, new agreements will not be radically changed. He once again called on Michel Barnier, the EU's chief negotiator for Brexit, and his team to find a reasonable solution to the border problem in the next 30 days.
Let me remind you that one of the stumbling blocks on the Brexit deal were disagreements between the parties on the border with Ireland and Northern Ireland, or the so-called "backstop", which is not resolved to this day.
As for the technical picture of the GBPUSD pair, as I noted in my morning review, further upward movement of the pound will directly depend on the level of 1.2180. Its breakthrough may lead to the demolition of a number of stop orders and a larger correction, however, the main problem for bulls will still be a high of 1.2265.
The euro fell sharply against the US dollar after the publication of the minutes of the July meeting of the European Central Bank. Data on manufacturing activity in the eurozone provided only temporary support to risky assets.
The minutes indicate that the ECB leadership agreed on the need for soft policies for a long period of time, and the new package of measures may include both lowering current interest rates and new asset acquisitions. The central bank emphasized once again that inflation in the medium term is an important element.
As I noted above, reports on manufacturing activity supported the euro in the morning.
So, according to Markit, the preliminary index of PMI procurement managers for the manufacturing sector in France in August amounted to 51.0 points versus 49.7 points in July, which indicates a resumption of growth in activity. Economists had forecast it at 49.5 points.
The preliminary index of PMI procurement managers for the German manufacturing sector also strengthened slightly in August to 43.6 points, but remained well below 50 points, which indicates that significant problems remained in the manufacturing sector, even despite slight growth. The economists predicted the index at the level of 43.0 points against 43.2 in July.
As for the eurozone as a whole, here the preliminary index of purchasing managers for the manufacturing sector rose to 47.0 points against 46.5 points in July and with a forecast of 46.4 points.
But the service sector remained at a fairly high level. There, the preliminary index of PMI purchasing managers' for the eurozone services sector in August rose to 53.4 points against 53.2 points.
As for the technical picture of the EURUSD pair, it has not changed at all. Bears will also aim to update the lows of last week with a test of support levels 1.1060 and 1.1030. If bulls make an attempt to build an upward correction in a pair, then it is best to consider short positions in the trading instrument from the upper boundary of the side channel at 1.1130. A larger resistance level is the area of 1.1160.
*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.
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