In the first half of next week, the current strengthening of the dollar may weaken a little due to the lack of important economic news. It will most likely be a small rollback. In general, trends in the Forex market will determine the statistics of the EU, Asian countries and the UK, and by the end of the week we are waiting for the next strengthening of the dollar. This is explained by the fall of the global economy. But the US economy has a greater margin of stability, therefore, it is falling more slowly than the European economy. This also coincides with the results of a technical analysis of the markets; everything indicates a strengthening dollar in the near future.
Pound movements can be unpredictable. Great Britain is in a state of pre-election race, which started on Wednesday, during which unexpected revelations and political alliances may arise.
What’s up with Brexit? At the moment, everything goes to the fact that Boris Johnson will resign, as well as Theresa May earlier. Teresa May failed to convince Parliament that she was right. Boris Johnson, who is openly waging war with parliamentarians, has even less chance. Sooner or later, a vote of no confidence will be put on the agenda. And although the vote is not an official order to resign as prime minister, this will be a step in the direction of the resignation of Boris Johnson. Sooner or later, questions will arise: “What did Johnson achieve in the few months of his reign? Which of his campaign promises did you realize? ” And the answers to them are so far obvious. The divorce proceedings between Brussels and London may well drag on for another year or two. The prospects for the British currency are still not as bright. After traders have gone through a week of euphoria due to the decrease in the probability of a “hard” Brexit in the near future to almost 0, it is time to return to harsh weekdays and understand that a “hard” Brexit may not exist, but the “divorce” procedure does not move with Dead center. And she cannot constantly be in such a suspended state. The British pound in the coming week will again be prone to fall, even if the Fed continues to soften monetary policy.
Most of the news coming from the UK next week. On Tuesday, it will be data on unemployment and average wage changes for August, on Wednesday – the consumer price index for September, on Thursday – retail sales and the European Union summit on Brexit starts. In addition, the United States will receive information on retail sales for September. However, despite the importance of future reports, the main attention of traders will be focused on Brexit, on the EU summit and on any information from Boris Johnson, Donald Tusk, Jean Claude Juncker, Michel Barnier, Angela Merkel, Emmanuel Macron. It is these actors who most often speak out about the promotion of the Brexit negotiation process and have the greatest influence on it. Regarding the chances of fulfilling one or another Brexit option, traders are advised not to try to guess the future. Brexit has repeatedly shown to all market participants that trying to predict how everything will end is an ungrateful affair. The growth of the pound was often associated with “pure water” rumors and unfounded market expectations, which each time gave way to a stronger fall in the British currency. That is why the movement of the pound / dollar pair this week may well be illogical and consistent with the nature of the incoming news. Thus, next week, when trading the GBPUSD pair, special care must be taken. As for the EURUSD pair, one of the important events is the report on the change in industrial production in August on Monday, and the inflation report for September on Wednesday. The greatest interest, of course, will be caused by the consumer price index, which in recent months has fallen to absolute lows. A value below 1.0% will no longer be considered just low, but critical. And then it can be expected from the ECB and a new reduction in key rates, the quantitative stimulus program in the first months of its operation is unlikely to be changed, but it can be expanded in the future. And for the euro, these are all potential bearish factors. In confrontation with the dollar, the euro has very few trump cards. And the main factor behind the growth of the euro at the moment is simply the technical need to adjust from time to time. There is no positive news from the EU. In the USA, recently, not everything is good either, but America’s economy is still stronger, macroeconomic indicators are higher, monetary policy is tougher. It is these factors that continue to play for the dollar.
Political events associated with the weakening of the US economy are beginning to control market trends. The main one is that the US Congress will begin hearings on the impeachment of the President.
Signs of a weakening US economy and favorable forecasts for the expected events of the end of the week may contribute to a weakening dollar and the growth of other currencies, especially European ones. It is likely that medium-term support and resistance lines will be identified along them. The rollback or breakthrough of these levels depends on the attitude of the European Union towards the “soft” Brexit plan and on the meeting of the Vice Prime Minister of the PRC with White House officials in Washington.
For the British pound, bad news. Recently, the British currency has often risen in price solely on the positive expectations of market participants regarding Brexit. It was assumed that the parties would conclude an agreement and disperse in a friendly manner. Each message that hinted at such a completion of the process was actively accompanied by purchases of the pound. But in 100% of cases, these messages were then not confirmed by the facts and real actions of the parties, and the pound very quickly returned to its original position and updated the lows. Now we can witness something like that. Yes, the “hard” Brexit seems to be delayed. Yes, it seems that the parties agreed to postpone the date. But what does it give? There is additional time that Boris Johnson will spend on finding workarounds for implementing the “hard” Brexit. But the lack of a favorable fundamental background can reverse the movement of the pound and provoke its new fall.
US authorities have decided since Friday, September 20, to exempt from duties 437 goods imported from China. Market participants almost always positively perceive any news on the topic of a trade war with China, clearly interpreting them in favor of the American currency. And even the fact that the Fed still seems to have embarked on a systematic easing of monetary policy has not yet exerted proper pressure on the dollar. Therefore, the dollar will tend to grow in the coming week, putting pressure on other currencies.