Summary:

• UK PM May updates lawmakers on Brexit developments
• “EU summit made important progress on post-Brexit ties”
• BOE deputy Governor Cunliffe with dovish comments

Today has been a fairly quiet start to the week for UK markets with the Pound and the UK100 both little changed. There has been a few developments heading into the European close however that may provide some volatility with UK PM Theresa My delivering a Brexit update to parliament. The following are comments from the PM:

• EU summit made important progress on post-Brexit ties
• Britain and EU united in principles of rights of EU citizens
• Made significant progress on Northern Ireland
• There will be no hard border between Northern Ireland and the Republic
• Ambitious and positive about negotiations
• Wants transition deal with as little change as possible

The overall tone here is fairly upbeat but there is still a concerning lack of detail. More than 6 months have elapsed since the triggering of Article 50 and the progress remains slow and frustrating. During the speech, Jean-Claude Juncker, president of the European Commission provided a timely reminder of the lack of progress by stating that the UK must agree on a divorce bill before trade talks can commence. 

Elsewhere the Deputy Governor of the Bank of England, John Cunliffe, has been rather dovish with some comments also out this afternoon. Speaking from South Wales Cunliffe said that while interest rates may have to rise it was more of an “open question” on timing. He also announced that if the bank’s latest three year forecast comes to pass, when they do rise rates they will not go up “as far and as fast” as they did before the financial crisis.

Whilst there is still some way to go until the end of the day, a potentially ugly candlestick is forming on the GBPUSD. The earlier high of 1.3230 coincided with the 21 day EMA (yellow line) and whilst price remains below here then the pair could be seen to be in a downtrend.

 The GBPUSD remains in a short term downtrend according to the 8 and 21 period EMAs. Source: xStation

A longer term trend identification technique is the Ichimoku cloud and the market fell below this last week. Price has been above the cloud for the vast majority of the year but with the market back below here there is some sign that the uptrend seen since the January low is under threat. Whilst it is premature to declare the uptrend over, as we have seen on two previous occasions when price has dipped below the cloud there has been a swift recovery. However, a failure to see buyers step in now would leave the market susceptible to a large decline. Ichimoku traders will be keeping a close eye on the accompanying lines for further confirmation of this break. 

 A failure for bulls to push price back above the Ichimoku cloud in the not too distant future could spell trouble and see further declines. Source: xStation