The euro has problems with growth and the pound, in this regard, is not so simple


British Prime Minister Boris Johnson, who initiated the holding of early elections in December, believes that a confident Tory victory will allow him to easily negotiate a "divorce" agreement with the EU through an updated parliament. However, no one knows how fate will turn: if Labor comes to power, the United Kingdom may face a second referendum.

"The victory of the Conservative Party is considered positive for the pound. According to recent polls, the Tories take a leading position, but this was also observed before the 2017 elections, which eventually led to a "suspended parliament," said by the Bank of America Merrill Lynch.

The day before, the official representative of B. Johnson said that the government does not intend to extend the transition period after Brexit, which is scheduled until December 31, 2020 and during which London and Brussels will need to come to an agreement on the details of future cooperation and conclude a new trade agreement.

"Given that the final coordination of all issues related to Brexit within one year seems unrealistic, the end of the transition period will mean the exit of Foggy Albion from the EU without a deal. If B. Johnson's position on this issue remains unchanged, then during the election campaign, the pound to the US dollar may fall below $ 1.26, and in 2020 - return to $ 1.20, "said Bloomberg analyst Richard Jones.

The GBP / USD pair has been consolidating in the range of 1.28-1.30 for the third week.

The risk of selling a "hard" Brexit has recently declined significantly, but the uncertainty surrounding the outcome of the UK pre-election keeps the market participants from actively opening long positions on the pound and limits the growth of not only GBP/USD, but also the EUR/USD.

The single European currency has come under pressure due to disappointing corporate reporting from European banks. Weak financial results of Deutsche Bank and Credit Suisse provoked a fall in bank stock indices for the third quarter. Thus, the close correlation of the latter with EUR/USD allows Nordea Bank experts to predict a decrease in the main currency pair to 1.08 by the end of 2019.

However, in any currency pair there are always two monetary units as well as many fundamental factors that also influence its quotes.

In October, the main drivers of the upward trend in EUR / USD were the decrease in divergence in the growth of the American and European economies and the limited potential for easing monetary policy by the ECB and the progress in trade negotiations between the USA and the Middle Kingdom, which reduced the demand for protective assets, including the US currency. All the more surprising is the correction for EUR / USD against the background of an ongoing series of news on improving trade relations between Washington and Beijing.

According to the Financial Times, the White House is considering the possibility of lifting duties on Chinese goods worth $ 112 billion. Reuters reports that Beijing is putting pressure on Washington, calling for the abolition of all duties as quickly as possible. At other times, Donald Trump would most likely say "yes you never know what they want," but not now. Now, presidential elections are approaching, and the primary task of the head of state is to maintain the current rate of economic growth. The escalation of the trade conflict can significantly complicate this task.

As a result, the increasing political uncertainty in the UK is a negative moment for the single European currency, however, the main drivers for EUR / USD growth remain. In the near future, the boundaries of the medium-term consolidation range may be determined. It is possible that the main currency pair will be traded within 1.1000-1.1400 before the end of this year.

The material has been provided by InstaForex Company -