Why is it not a time to buy a dollar?


The US stock market rebounded, volatility declined, and a falling dollar began to show signs of life. The week as a whole was calm, the suspension of the work of the American government did not bring a negative to the financial markets, but only limited the publication of macro-statistics on the country.

Earlier, Fed officials, including Jerome Powell, announced the exhaustion of the economy. At the same time, weak markets and uncertainty in the world require the regulator to be patient in raising rates, at least until summer.

It was also said that the Fed will continue to reduce its own balance, and investors have made this comment the main thing for themselves. The main point is to slow down the economy and soften the position of the regulator. The latest data showed that consumer prices went down for the first time since March, against this background the annual consumer price index for the first time since August 2017 fell below 2%. After a sharp fall in oil and gas prices at the end of last year, this was quite expected. The deterioration of the situation is fixed in the sector of production and services. Even if the statistics on retail sales will be strong after the successful holiday season, a negative outlook for the economy as a whole means that now is not the time to buy a dollar.


As for the euro, it is one of the few currencies that has fallen in price against the dollar since the beginning of the year. Investors, as we see it, sell dollars, but they don't invest in the euro, as the growth of the regional economy slows down and political risks increase. France was seized by a wave of protests that did not subside. The report on orders for industrial goods in industrial production in Germany showed the negative impact of tension in world trade on the economy.


The force was demonstrated by the British pound, which received support from reports of a possible postponement of withdrawal from the European Union. You need to be careful here because the chance that Prime Minister Theresa May will lose the main Brexit vote in the short term remains high. Most parliamentarians are likely to vote against the draft on a deal not agreed with the EU. The only reason this is perceived as positive is that many assume the need to waive the deadline if the British authorities reject the project.

The subsequent development of events is extremely difficult to predict. In theory, the failure of the vote should lead to a sharp drop in the GBPUSD pair by 1% or 2%. Recovery will depend on the speed at which the backup plan is published. If the Brexit date remains the same, the sterling may increase losses, and if you postpone the deadline, you should expect a pound rally.


A backup plan of action would look something like this, May organizes a second vote. Perhaps, supporters of the EU are initiating a new referendum or the UK will begin the process of a "hard" exit from the union.

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