Growing panic points to a new wave of global crisis

The results of the G20 summit were not able to support positive sentiment, it took markets only a day to return to panic sales. US stocks fell by more than 3%, there was a sharp drop in yields on government bonds across the spectrum, the threat of a slowdown in the global economy does not lead to a further decline in oil prices, which can be regarded as an increase in doubts about financial stability in general.

The index of business activity in the manufacturing sector ISM in November exceeded the level of November, which was a surprise for the markets that were expecting a decline. A strong ISM traditionally supports the dollar, but this time the markets did not respond to the positive news. Perhaps the fact is that some important components of the index have deteriorated, in particular, the price subindex has decreased from 71.6p to 60.7p, heightening concerns about a slowdown in inflation.

Yes, and with new orders, the situation looks negative, despite some growth, the peak of the beginning of the year was far behind, and export orders fell to the area of 2-year lows.

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It is indicative that, on reaching agreement on the normalization of trade relations between the United States and China, the reaction on Monday was rather lopsided. On the one hand, the yuan has sharply strengthened, but relative to European currencies, the dollar continued to decline, that is, in general, the players are quite skeptical about the likelihood of reducing tensions and ending trade wars.

Growing panic for some time will play in favor of the dollar, but in the long term, the chances of continued growth are small.

Eurozone

Macroeconomic data from the eurozone support the euro. The growth of PMI in the manufacturing sector in November slightly increased. Producer prices also rose contrary to forecasts, despite cheaper oil, but in the current conditions, the positive was clearly not enough. The euro may return to the growth trajectory in the coming days, but the threat of launching TLTRO-3 by the summer of 2019, due to the need to maintain liquidity after the start of the TLTRO-2 redemption cycle, in order to prevent strong growth of the euro, will keep bulls at least until the last meeting ECB in the current year.

The currency pair EUR / USD has not yet gone beyond the wedge formed in the last month and can find support at 1.1290. Today, trade is likely to occur in the sideways range, the upper limit of which is in the 1.1360 / 65 zone.

Great Britain

A week before the fateful vote in parliament on the agreement reached on leaving Great Britain from the EU, the May government suffered a serious defeat in the House of Commons. The deputies voted to investigate the question of disrespect of the cabinet of ministers to the legislature, which was that the parliament for unclear reasons was not provided with the full text of the conclusion of the Attorney General of England and Wales Brexit agreement.

The proposal to hold the trial was supported by 311 deputies, 293 deputies voted against, indicating that May's cabinet lacked the necessary majority to approve the agreement.

The pound fell to an 18-month low, completely ignoring the positive macroeconomic data. The business activity index in the manufacturing sector rose in November to 53.1p against 51.1p, in the construction sector, from 53.2p to 53.4p, the growth in activity indicates the likelihood of higher GDP growth rates than previously thought.

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In previous times, the pound would have responded to the growth of positive data, but the situation on Brexit outweighs all other news many times over. Today, Markit will publish PMI data in the service sector, the pound may receive some support, but on the whole, it must be assumed that the chances of failing to ratify the agreement are high and the pound will remain under strong pressure.

Today, GBP / USD will once again test the support of 1.2650 for strength. In the case of a breakdown, the movement may accelerate, the short-term target of 1.1430 can be achieved in the perspective of two days.

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