The British pound surged higher after the meeting of British and Irish Prime Ministers Boris Johnson and Leo Varadkar. Even though at the end of the meeting on Thursday, the parties agreed to continue discussing the problems, this did not prevent the British pound to grow by more than 250 points against the US dollar and several other world currencies. But if you look at the issue in more detail, it is clear that there are no changes to the agreement on Brexit. Perhaps traders will "come to their senses" after today's meeting of British Minister for Brexit Affairs Stephen Barkley with the EU's chief negotiator for Brexit Michel Barnier.
In the meantime, there are plenty of problems hindering the achievement of an agreement between the United Kingdom and the EU on Brexit, and the fact that Ireland has made concessions by agreeing to discuss some of the current problems, which are already known to everyone, does not mean that the parties have taken a huge step towards reaching an agreement on at least one of the problems. The minutes of the meeting said that the UK and Ireland are ready to continue negotiations, as they see a path leading to a possible agreement. No other details of the meeting were released.
Let me remind you that the negotiations concerned mainly customs issues. The future direction of the pound depends on what the meeting between Barkley and Barnier will be today. There are a lot of people willing to buy, but the risks against the background of the current situation, especially after yesterday's data on the slowdown in economic growth in the UK, are also quite high.
As for the technical picture of the GBPUSD pair, the bulls will likely seek to update the highs in the area of 1.2530 and 1.2570, however, it is necessary to consolidate above the resistance of 1.2485. If the meeting is held in a negative format, it will cool the ardor of buyers of the pound, which will lead to a downward correction in the area of large support levels of 1.2385 and 1.2320.
EURUSD
Another serious meeting will take place today that could have an impact on the foreign exchange markets. US President Trump will meet with China's trade negotiator. Negotiators from China have already arrived in Washington to discuss options for overcoming the current impasse. On his twitter, Trump wrote: "Big day of negotiations with China. They want to make a deal, but do I? I meet with the Vice Premier tomorrow at the White House."
Yesterday, the US Federal Reserve said it intends to adopt amendments to banking rules. We are talking about a new procedure for identifying banks, as well as easing liquidity requirements. The committee is preparing to develop rules based on which liquidity and capital requirements for large American banks will be relaxed. It is also expected that a plan will be adopted to reduce the cost of compliance with regulatory requirements for regional American lenders, whose assets amount to less than $700 billion. This was done to eliminate the problem with the lack of liquidity that is now observed in the debt market in the future.
As for yesterday's fundamental statistics, the data on the reduction of applications for unemployment benefits did not greatly excite the markets. According to a report from the US Department of Labor, the number of initial applications for unemployment benefits for the week from September 29 to October 5 fell by 10,000 to 210,000. Economists had expected the number of applications to be 218,000. The number of secondary applications for the week from September 22 to 28 increased by 29,000 and amounted to 1,684,000.
The inflation data did not please economists, who had hoped for a larger increase in US consumer prices in September this year. According to a report by the US Department of Labor, prices remained unchanged. Falling energy prices and lowering car prices held back inflationary pressures. The basic consumer price index, which does not take into account volatile categories, rose in September by 0.1% compared with the previous month after rising by 0.3% in August. Economists had expected a general index of 0.1%, and a base index of 0.2%. Compared to the same period of the previous year, the consumer price index rose by 1.7%, and the base by 2.4%.
Robert Kaplan, President of the Federal Reserve Bank of Dallas, addressed the topic of interest rates. During the interview, Kaplan said that it was necessary to assess the likelihood of another rate cut later this year, and the Fed's decision to cut rates in July and September was correct. Kaplan also noted that it is not necessary to determine the course of monetary policy in advance, however, the Fed will not wait for the manifestation of the weakness of the economy before lowering rates further.
As for the technical picture of the EURUSD pair, the further movement of the pair will depend on the negotiations between the US and China. In the case of a breakout of resistance 1.1035, buyers of risky assets can see the update of highs in the areas of 1.1070 and 1.1110. In the case of pressure on the pair after the negotiations between the US and China, the breakthrough of the intermediate support of 1.1000 will increase the pressure on the trading instrument, which will lead to the test of the lows of 1.0950 and 1.0900.