Euro, pound, oil: main trends

Eurozone

Against the backdrop of the political crisis caused by Catalonia's desire to withdraw from Spain, the German economy continues to hit record growth rates and provide the euro with support against the strengthening dollar. Preliminary data on production orders in August showed a significant excess over forecasts. Growth was at 3.6% against expectations of +0.7% with year on year growth of 7.8%. This is the best result for six months and the second best for the last 7 years.

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On Monday, a report on industrial production in Germany will be published. The markets are waiting for good data. Also, on this day, Sentix will present an indicator of investor confidence in the euro area. After a 10-year high in June, there was a slight decline. However, currently, experts believe that the index will update the record and grow to 28.5 p, which could significantly support the euro.

Despite a number of positive news, the euro is still under pressure. The probability of a move to 1.16 remains high. Some support for the euro could have an increase in anti-risk sentiment but in general, the dollar looks stronger at the moment.

United Kingdom

The key day for the pound is the report on industrial production for August that will be published on Tuesday. The expectations are neutral. Experts do not expect any growth in production or any decline. Also on Tuesday, the NIESR will publish the research results on GDP growth rates for the last 3 months. Given the rather weak PMI indices, it is not necessary to expect economic growth. At the moment, the forecast is +0.3% which is kind of too weak to expect the pound to resume its growth.

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The pound continues to experience political pressure. After the unsuccessful elections in June, the positions of Theresa May were somewhat shaken by the parliament. The Conservative Party congress, which ended on Friday, may be the last one in the post of prime minister Theresa May. She is losing ground as the party leader. Meanwhile, there is also growing tension between the ambassador and the leaders of European countries, who are already openly annoyed about May's position on the Brexit.

As everybody knows, Britain intends to leave the EU in March 2019. However, the country wants to retain a two-year transition period during which it will have access to EU markets on current terms. The position of the pound largely depends on whether May will be able to insist on this point of negotiations, since the pound may be either a winner or a loser.

At the moment, the pound continues to remain under pressure. An attempt is likely to happen towards a technical correction to 1.3250. However, the general trend is not in its favor. The growing confidence of the dollar and the tightening financial conditions will play against the pound.

Oil

Baker Hughes on Friday reported a slight reduction in the number of active drilling rigs. The news could not support the declining oil. At the moment, there is no explicit driver for oil, which is able to withdraw quotes from an unstable equilibrium. News about the growth in production in the US is short-term, as there is no data on the return of investment in the industry. This will inevitably lead to a decline in production.

Russia and Saudi Arabia are actively working to prolong the agreement to limit production. Given the serious political changes, one can be sure that the agreement will be held. Brent, in the short term, may adjust to the support level of 53.20 / 70, but long-term chances for growth remain higher.

The material has been provided by InstaForex Company - www.instaforex.com