Euro and pound under pressure due to fears of a recession approaching

Eurozone

There is no opportunity for the bad news of the euro to end. The indicator of investor confidence Sentix declined for the sixth time in a row, reaching -3.7p, which was the lowest since November 2014.

The analytic group Sentix believes that the main reason for the decline is waiting for Brexit as the economy has to deal with contingency plans. Many companies, one way or another connected with trade between the UK and the EC, do not have a desire for growth and are looking for ways to keep their business stable.

Until recently, respondents had not yet anticipated the onset of a recession, but the rhetoric of the Central Bank is becoming more and more dovish and along with a decrease in investor confidence, consumption and retail sales are down.

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The GDP growth of 0.2% in the last quarter of the past year and published macroeconomic data indicate that in the first quarter of 2019, there is no reason to expect economic recovery. The PMI indices are at 5-year low and if in France and Spain there are some signs of stabilization, then Germany falls in all sectors without exception. Italy has already plunged into recession.

The ECB finally acknowledged the lack of strong growth and changed the risk assessment. At the same time, the ECB did not make any changes in the monetary policy. Thus, investors need to wait for the March meeting to understand how much the changed assessment will affect the regulator's plans. So far, only two parameters support a relatively positive decision, is it stable inflation and wage growth in the eurozone? But, will there be enough of them to continue the growth of the euro?

Today, the EUR / USD pair is under pressure. The nearest support is at 1.1405 and 1.1389 , however, a deeper decline is still unlikely.

Great Britain

The PMI in the services sector fell to 50.1p in January and closely approaching the border, below which is the beginning of a recession and the minimum value since July 2016. The economic growth in the last quarter was minimal in six years while employment in the sector fell for the first time also in six years.

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The pound continues to be under pressure against the backdrop of growing political uncertainty due to Brexit. Two reasons are known to bring growth to the pound in January. Firstly, it is due to the completion of negotiations and secondly, the development of a decision that brought the parties closer to a compromise. However, this decision intensified the domestic political crisis in Britain.

The main financial threat does not matter at all in matters of migration policy and not in matters of trade, which can be completely settled by a separate agreement. The main threat is that British financial institutions will lose or significantly weaken their influence on continental cash flows. At the moment, this is the main reason that could lead to increased pressure on the pound in the event that "Plan B" does not receive support in parliament.

The GBP/USD pair declines on Tuesday with the nearest support level at 1.2995 / 3010. It draws the mouth before the end of the day since there are no reasons for turning north. The decline can go without correction up to 1.2953 / 65. If there is at least some negative news about the upcoming vote, the probability of which is rather high.

Oil

Brent continues to trade above $62 per barrel, reflecting the change in the Fed's position and the activity of OPEC + countries to reduce production levels. Stock indices of most countries of the world are growing. Against this background, oil has a chance to go above 63.60 in search of stronger resistance.

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