The situation in the foreign exchange market remains ambiguous. Investors with suspense await the outcome of the Fed meeting on monetary policy, which will be held on December 20, as well as the further development of the situation around Brexit.
On the one hand, the markets are waiting for the Fed meeting at the rates, and although they have no doubt that the key interest rate will be increased by 0.25%, they will be interested in further prospects for their uplifts. On the other hand, a high probability of not concluding an agreement on the terms of the UK's exit from the EU, as well as an increase in social tensions in France and the possible expansion of this phenomenon to other European countries, could be a catalyst for a worsening economic situation both in Britain and in continental Europe.
The lack of positive news has already hit the sterling rate and in the future could lead to its further decline in the currency markets. Also, such prospects threaten a landslide fall of the local stock market. Shares of British companies may lose about 20-25% of their capitalization, according to MSCI estimates. In this situation, one can also expect strong pressure on the single currency rate, which will lose against the US dollar in the wake of Brexit's uncertainty factor and the prospects for a slowdown in the eurozone.
We believe that the absence of an agreement between the UK and the European Union or the conclusion of conditions enslaving for the British will lead to economic and even possibly political upheavals in the "foggy Albion", which will undoubtedly bring down the British currency.
Today, market attention will also be directed to the publication of consumer inflation data in the United States. According to the forecast, in annual terms, the consumer price index will fall to 2.2% from 2.5%, in monthly terms the indicator will not show any dynamics in November against the increase in October by 0.3%. But at the same time, it is expected that core inflation on an annualized basis will grow by 2.2% against the previous period under review, 2.1%. It is assumed that in November, the growth rate of the indicator will remain at the level of October, rising by 0.2%.
Evaluating the possible reaction of the market, we can expect that the publication of growth rates above the forecast will undoubtedly support the dollar, as it lowers the expectation of a pause from the Fed in the process of raising rates in the new 2019. At the same time, a decrease in inflationary pressure will lead to a weakening of the American currency.
Forecast of the day:
The currency pair EUR / USD is trading above the level of 1.1310. Positive news about rising inflation in the United States will put pressure on the pair, and it may fall to 1.1220 after falling below 1.1310.
The currency pair GBP / USD is below the level of 1.2565 against the background of Brexit problems. It can both adjust upwards to 1.2565, but also fall to 1.2400, if inflationary pressure in the USA increases, according to statistics presented today.
