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Review of GBP/USD as of July 18, 2013

Looking at the UK labor market data, it becomes clear that they are disastrous. The only favorable thing is the unemployment rate itself remained unchanged. But everything else does not just cause fear, but even panic. The number of applications for unemployment benefits increased by 7.8 thousand and expected to decrease by 2.1 thousand, but the wage data came in much worse. As expected, the growth rates of the average wage without premiums slowed down from 2.8% to 2.7%, but the growth rates of the average wage, taking into account the premiums, did not remain the same but slowed from 2.6% to 2.5% %. The decline of wages against the background of rising inflation is an extremely negative factor for the medium-term prospects of the British economy. And, this is all against the backdrop of difficulties with the "divorce" with the European Union.

But it did not stop there, as the dollar went up all day. The growth in the dollar was supported by the industrial production data, showing the growth rate accelerated from 3.2% to 3.8%. Its contribution to the dollar strengthening was introduced by the Fed Chair, whose statements were quite curious. After the press conference, Mr. Powell was questioned about customs duties and trade agreements and the head of the Federal Reserve said that he did not agree with the White House policy. In his opinion, it is necessary to strive for the complete removal of all trade barriers in international trade. He also added that there no way to calculate yet the consequences of the trade war, which in fact has already begun. However, the Fed does not intend to revise its plans at the refinancing rate, unlike the ECB and the Bank of England which mention trade disputes in the context of the refusal to tighten monetary policy. The head of the US Central Bank confirmed again that the refinancing rate will be raised once more by the end of the year. Such a confident position of the Fed gives the dollar strength.

Today, the pound has a great chance to win back its losses due to inflation data, which is expected to grow from 2.4% to 2.6%. Of course, the inflation growth against a background of declining incomes of the population does not look very nice. However, large investors have already executed decline in salaries, and they think in several other categories. The increase in inflation indicates growth in the investment return, and also allows us to hope that the Bank of England will come to its senses and raise the refinancing rate.

The American statistics are expected to be multidirectional, as the number of construction projects are projected to be reduced by 2.2%, but the number of building permits issued may increase by 6.0%.

Most likely, the pound will be able to grow to 1.3175.

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* The presented market analysis is informative and does not constitute a guide to the transaction.

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