Escape who can: the market continues to fall

On Wednesday, panic sales in global stock markets continued. Despite the fact that in the US markets were closed due to mourning, S & P500 futures fell by more than 2%, while the European stock indices lost an average of 1 to 2%. Therefore, the decline in government bond yields intensified.

The negative was reinforced by the publication of the Beige Book - a summary report of the Fed on the state of the US economy. Most of the regional offices of the Fed indicates moderate or weak growth, confirming market concerns about the approaching recession. The expectations of the employment report on Friday are becoming increasingly nervous. Under threat and truce in the trade wars between the United States and China - the arrest in Canada of the Huawei company director and the threat of extradition to the United States will inevitably lead to a harsh reaction from China.

Today, the dollar may turn out to be super-volatile - the ADP report on employment in the private sector, ISM on the services sector, the trade balance for October, and updated data on labor productivity in the 3rd quarter, plus the statement by Fed Chairman Powell, will be published. In general, the dollar looks weak, losing not only to the yen as the undisputed favorite of the day, but also, probably, to European currencies.


Prospects for the euro are now generally evaluated in terms of expectations of the ECB meeting at which the regulator will be forced to give its assessment of the slowdown in business in the eurozone. Will the decrease in PMI be recognized as temporary and not requiring drastic measures? Or will there be an admission that the decrease in activity? This is systemic in nature and will force the bank to make adjustments to monetary police.


One of the main intrigues is the launch of the TLTRO- 3 program in the first half of 2019. The bank is likely to be forced to clarify this issue, since the completion of TLTRO-2 will lead to a liquidity deficit and will contribute to the growth of the euro, which the ECB will lower business activity would like to avoid. As a result, the ECB will have to launch the TLTRO-3 program either as a temporary measure to extend the maturity of operations under the TLTRO-2, or as an independent program. The first option will help stabilize demand for the euro, the second may lead to its fall even against the background of a slowdown in the US economy, and it's unclear what path the ECB will take.

It is already clear that inflation and GDP forecasts will be revised downwards, which in itself is a strong pigeon factor for the euro, so the ECB may refrain from expressing concern in particular. Markets are inclined to believe that the ECB will refrain from announcements of a change in position on monetary policy. Thus, this will keep expectations on the rate at the same levels and ultimately prevent the euro from falling.

In the absence of direction, EURUSD continues to trade in a range in anticipation of news. Support 1.1290 is still relevant, resistance 1.1360 / 65, volatility is likely to increase towards the end of the day against the background of the publication of important macroeconomic data.

Great Britain

The pound is living with expectations of an approximation of the date of voting in the Parliament for Brexit.More so, the expectations are negative, the probability of falling support 1.2650 / 65 looks high. The short-term goal is 1.1430, the rate of decline will be determined by the rate of deterioration of the general political background in the country.

The material has been provided by InstaForex Company -