The pound and the euro are still outsiders

The world economy continues to signal a slowdown, and it seems that the most dramatic events in the near future will begin around Britain's exit from the EU.

Published on Monday, UK GDP data clearly demonstrate that Brexit has dealt a severe blow to the weak economy, which can not fully recover from the monstrous strength of the economic crisis of 2008-09. In addition to the negative economic effect, Britain has suffered reputational losses. The internal political struggle between the supporters of Brexit and its opponents led to the traditional effect – the search for an external enemy. And it became Russia. Trying to divert the attention of the people of the United Kingdom from economic and political problems by forcing hysteria against Russia does not help in solving political and economic negotiations with the European Union. On the contrary, such behaviour has the opposite effect, leading to a complete loss of confidence in the island nation. The history of Venezuelan gold clearly indicates that the British authorities, amid the struggle with the Venezuelan president, appears to have decided to plunder this country on the sly, taking away the gold reserves stored in Britain.

According to the published data, in monthly terms, GDP shows a negative trend, falling by 0.4% against growth in the previous period by 0.2%. On a year-on-year basis, the British economy's growth rate fell to 1.3% from 1.6%. If the economic slowdown continues at this rate, a recession will be just around the corner.

The dynamics of another important indicator – the volume of industrial production – indicates a rise of negative trends. In December, the indicator showed a strong fall - by 0.7% on a monthly basis against the expectation of an increase of 0.2%. The annual value fell even more - by 0.9% against the forecast of a decline of 0.4%.

In our opinion, the situation in the British economy as it approaches the "x" point, when the UK will have to announce its exit from the EU, will only worsen. This state of affairs will also have a negative impact on the situation in Germany and in Europe as a whole, although it will not be so catastrophic. Given this most likely scenario, we believe that the GBPUSD and EURUSD pair will remain under pressure.

Most likely, with the approaching date of the country's exit from the EU and the lack of a sane agreement, the British currency will only strengthen its fall, pulling down the euro currency.

The forecast for today :

The EURUSD is trading below 1.1300, breaking out of the short-term uptrend. It could partially recover to this mark. We consider it possible to sell the pair from this level or after a decline below 1.1270 with the prospect of a price drop to 1.1215.

The GBPUSD is above the level of 1.2845. We consider it possible to sell the pair with possible local targets of 1.2830 and 1.2800.



The material has been provided by InstaForex Company -