Global macro overview for 27/02/2018

In his speech in the European Parliament, The European Central Bank (ECB) president Mario Draghi demanded a central role in the supervision of clearing central counterparties (CCPs), yet struck a more flexible tone than some European politicians who want the multi-trillion Euro clearing industry to be removed from London City. Draghi made it clear that he sees Brexit as a reason for the EU to speed up the pact of regulations which will give the ECB more power over clearing houses in London financial center and beyond. Draghi said he wants to "stress the crucial importance of finalizing the adoption of key pieces of EU legislation, such as Emir II, well in advance of Brexit, in order to be prepared for all possible contingencies, including a no-deal scenario." The latest update of the European Market Infrastructure Regulation (Emir II) would allow the ECB to directly regulate third-country clearinghouses, with the possibility of stricter rules or even forcing systemically important firms to move their operations to the Eurozone. The rules are currently being discussed in the European Parliament and could pass as soon as the end of the year.

London City is the biggest in the world financial center, where companies use derivatives to hedge against the risk of a whole host of market movements, such as changes in interest rates or foreign exchange, and the vast majority of euro-denominated banking clearing currently taking place in the UK. It would be a huge loss for the London and the whole UK if this center would have been moved in one of the European cities like Frankfurt, Brussel or even Warsaw.

Let's now take a look at the GBP/USD technical picture at the H4 timeframe while the London is still the world financial center. The market is still trading below the golden trend line in a narrow range between the levels of 1.3921 - 1.3986. The momentum is hovering around its fifty level as well, which indicates more sideways price action.


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