Sterling gaps lower on Brexit worries, Gold pulled back after hitting three-weeks high

Sterling gaps lower on Brexit worries, Gold pulled back after hitting three-weeks high

Sterling gaps lower on Brexit worries

Investors’ focus is still captured by the Brexit developments that are still the main driver of the pound. After last week’s recovery, the pound came back under pressure and opened with a gap lower this week (after closing at 1.2955 on Friday, it opened at 1.2913 on Monday).

The reason behind that weakness was not-so-encouraging Brexit signals over the weekend. EU chief negotiator Michel Barnier opposed to Theresa May’s proposals and rejected Britain’s request to choose the appropriate European economic system and European laws. Barnier said Britain could maintain its position in the European market just like Norway, provided it complies with the laws and contributions on European cohesion. He said allowing Britain to ‘cherry pick’ regulations will open the door for other partners to demand similar exceptions.

Overall this file is complicated and the negotiations will face a lot of breakthroughs and a lot of complications so investors should be aware of the high volatility that the pound will be exposed to. the all-important Inflation Report Hearings are due tomorrow, and can also dictate sterling’s direction in the short term. I think that in the end the two sides will reach a deal, but now the risks are still tilted to the downside.

Gold pulled back after hitting three-weeks high

Gold turned back lower after spotting a fresh three-weeks high on Tuesday.

Gold declined amid concerns the US-China trade standoff may escalate further this week, additionally, last week’s discussions between Canada and the US on forging a new North American trade pact weren’t fruitful, as well as the US threat to leave the World Trade Organization. Those concerns have boosted the demand for safe havens again, including the US dollar as the US economy is the strongest, bringing the Dollar-denominated gold under pressure.

Overall, gold reflected positive technical signals last week and therefore holding above the support level at $1180 will keep the upside potential open for a move towards the $1235 resistance level. A drop below $1180 will lead to sharp declines towards $1140.