March 2-6, 2020. Conglomerate of fundamental problems

2020-02-29

London announced its mandate for trade negotiations with the European Union. It turned out to be no less rigid and quite ultimatum. First, the British continue to insist that the trade deal with the EU should be similar to the agreement with Canada. Secondly, the Johnson team ruled out the possibility of prolonging the transition period – although almost all experts unanimously say that the parties will not have time to agree on all the nuances of future relationships for such a short period. But London stands its ground. They identified an intermediate “deadline”. If by June it becomes clear that until December the parties will not be able to conclude a trade agreement, then Britain will go into preparation for exit without a deal. According to Johnson, by the beginning of the summer, negotiators should agree at least on the general features of future relations. The British also once again emphasized that they would not follow the rules and regulations of the European Union.

Thus, the dispositions of the parties indicate that a fierce struggle between the negotiators awaits us in the coming months. The British mandate runs counter to almost everyone with the requirements of Brussels, and in categorical form. It is likely that during the many months of negotiations, the parties will nevertheless make certain compromises – as was the case during last year’s dialogue. But initially, negotiators will almost certainly demonstrate an extremely tough and peremptory line of behavior, thereby raising rates and expressing readiness for any outcome of the negotiations. Therefore, the results of the first meetings of the negotiating groups can put strong pressure on the British currency. Despite the price pullback at the close of the previous trading week, the GBPUSD pair is likely to continue the downward movement next week, especially if the first dialogue between the negotiators ends on a minor note. The immediate goal of the downward movement of GBPUSD is the support level of 1.2670.

The theme of coronavirus will continue to hold an important place among the factors of next week affecting the Forex currency market. Investors will receive the first objective reports on the impact of the virus on China after the release of the February economic indicators. Negative values ​​will result in a demand for debt obligations of the US government, which will lead to a stronger dollar and affect the depreciation of major currencies.

The implementation of this option may call into question the rumors about preparations for a significant reduction in the Fed rate, which already ensured the growth of the euro at the end of the past week. In this case, it will be difficult to determine the trend, therefore, it is better not to trade with the aim of making a profit on major currency pairs.