The main agenda yesterday was the UK government's decision on Brexit. Yesterday, a new plan was presented that could help smooth out disagreements between the EU and the UK on a break in relations.
As it became known, the UK plans to abandon the introduction of border and customs control on the border with Ireland. This is a very important step towards the settlement of differences, as it is because of the problems with the physical border that it has been impossible to reach an agreement for so many years. With this message, British Prime Minister Boris Johnson appealed on Wednesday to EU President Jean-Claude Juncker.
It is proposed to conclude a trade agreement by 2020, in which all stages, as well as mechanisms for interaction with the EU, will be spelled out in more detail. But the focus will be on ways to control the movement of goods across the border with Ireland. After Northern Ireland, as part of the United Kingdom, leaves the EU customs union after Brexit, the rules applicable during the customs union with the EU will remain the same and will be valid for another 4 years. The UK government has promised that it will not exercise any control over the movement of goods during this period. However, after this period, Northern Ireland will become a full part of the British customs zone.
In the future, Johnson proposes to replace the introduction of a special customs and border regime with a system of declaring goods and partial checks of goods in ports.
Everything would be fine, but it is not clear whether the EU representatives will agree to such half measures. The demand for the British pound, which, after such seemingly positive news, remains to trade in the area of weekly lows below the resistance of 1.2330, suggests that the European Union can also wrap up this proposal.
In any case, it is necessary to wait for the report and the corresponding reaction of the EU.
Yesterday, EU spokesman Jean-Claude Juncker welcomed Boris Johnson's intention to make progress on the Brexit agreement but noted that there are still some problematic issues that need to be worked on. Juncker said that border controls, customs regulations – these are the issues that need to be addressed, and the plan that assumes Northern Ireland will follow EU rules – is a good step towards resolving the issue.
Also yesterday, British Prime Minister Boris Johnson announced his intention to ask again the Queen to suspend the work of Parliament. This will be done to prepare well for the speech of Elizabeth II at the opening of the new session on October 14. Johnson said that if his plan is adopted by the EU, it will take time to prepare a more detailed speech by Elizabeth II.
As for the technical picture of GBPUSD, further growth will depend on the breakdown of the resistance at 1.2330, which will provide the market with new buyers, and will also lead to the demolition of several sellers' stop orders. The targets will be highs in the areas of 1.2370 and 1.2440.
The euro ignored the news that the US is ready to impose duties on aircraft imported from the European Union in the amount of 10% and agricultural and industrial products in the amount of 25%. This was announced yesterday by US trade representative Robert Lighthizer.
The decision came after the WTO allowed the US to impose $7.5 billion in trade measures against the EU. Such actions are directly related to the subsidization of the European aircraft manufacturer Airbus. The decision to introduce duties will take effect on October 18. The American representative noted that the duties will be directed to imports of Germany, France, and the UK.
As for the fundamental statistics, yesterday's report on the number of jobs in the US private sector disappointed traders. According to the ADP research institute and Moody's Analytics, the number of new jobs in the private sector during the reporting period was 135,000, while economists surveyed expected the number of jobs to grow by 140,000.
Data on the indicator of business conditions in the city of New York also disappointed traders, putting even more pressure on the dollar. According to a report by the New York branch of the Institute for Supply Management, the index of current business conditions in September 2019 fell to 42.8 points, against 50.3 points in August. Index values below 50 points indicate a decline in business activity.
As for the technical picture of the EURUSD pair, only the breakthrough of the resistance of 1.0970 will lead to the continuation of the upward correction and the renewal of the highs of 1.1000 and 1.1040. If the pressure on risky assets returns after the data on the eurozone services sector, the levels of 1.0930 and 1.0900 will support the trading instrument.
