Do not expect strong movements in pairs with the dollar

As March approaches, the tension around the story with Brexit more and more shows a high degree of probability that there will be no amicable solution to the problem between Britain and the EU.

The inability of the Cabinet of Ministers T. May and the local parliament to reach an agreement between themselves, and then May itself with the European Union, indicates a high degree of probability of an uncontrolled exit from the EU, which can deal a severe blow not only to the economy of the island nation, but also to large Europe. So far the situation has "frozen", exerting the strongest pressure on the dynamics of sterling and euro currency. The first one reacts nervously to any negative and "positive" news, moving without a definite direction, either up or down.

The second one actually froze and moves in tandem with the American dollar in a rather narrow range for the fourth month in a row. If in the case of the GBP / USD pair, the Brexit theme is predominant, in the second case, the pair is under pressure from falling expectations that the ECB will decide this year to begin the process of a slow rise in interest rates. Moreover, this is happening against the background of a noticeable slowdown in the growth of the European economy, which has already given rise to talk that the economy of the eurozone countries may fall into recession this year. But there is another important factor that does not allow the pair to fall on the wave of the weakness of the euro, this is the strongest pressure on the US dollar. The Fed's signals that it will most likely make a pause in raising interest rates in the first half of this year, the topic of stopping the work of the US government, and the possibility of resuming the shutdown on February 16 against the background of the political struggle between D. Trump and his opponents, all this puts pressure on the dollar.

But in this situation, everything is not so simple again. The slowdown in the global economy, as well as the European and Chinese along with it, as well as the high probability of this process already beginning in the States, forces investors to reduce the risk of appetite and buy US Treasury debt securities, which leads to a demand for the dollar and supports its course. Simply put, the US currency is in demand as an asset safe haven.

This is the extremely complicated situation in the markets, which, in our opinion, will continue at least until the beginning of March.

Forecast of the day:

The currency pair EUR / USD is trading above the level of 1.1315, which coincides with the support lines of the short-term uptrend. If it keeps above, there is a probability of a local growth to 1.1390-1.1400.

The currency pair GBP / USD is above the level of 1.2920. If UK GDP data turns out to be weaker than forecast, there is a chance that the price will continue to fall to 1.2830.



The material has been provided by InstaForex Company -