In the first week of April 2019, the dollar is expected to weaken. This is due to two factors: the weakening of the US position in trade negotiations with China, and everything that is already pretty annoying Brexit.
Questions in the negotiations the US and China are fixated on the fact that China has agreed to prescribe at the legislative level the right of access to the domestic market for American companies. Obviously, the conditions are not quite acceptable for the United States, so they extend the negotiations for weeks or even months.
The deputies of England will consider the third time Tereza May’s Brexit proposal under the guarantee of the Prime Minister’s resignation.
Brexit’s theme will be heard again on Monday, Parliament is obliged to consider civilian petitions that have collected more than 100 thousand signatures. For the abolition of Article 50, providing for a break in relations with the European Union, were more than 5 million citizens. Another 4 other options of civil will also exceeded the one hundred thousandth threshold. The petitions will be considered by the Parliament on an optional basis, since in fact the deputies have already voted for these proposals.
The trend has begun to weaken the dollar. It will probably be long term. The reason – the US Federal Reserve refused to raise interest rates in 2019. The rate was left at 2.5%.
In Beijing, on March 27-28, the eighth round of China-US trade negotiations will take place. The PRC wants firm guarantees of the abolition of increased duties before the final meeting with Donald Trump, who, on the contrary, promised to restore sanctions in the near future. If the trade negotiations do not end by the end of the week by announcing the date of the summit, this will reinforce the fall of the dollar.
A new situation with Brexit can slow the dollar down or cancel it – if the English Parliament chooses the option of leaving the EU next week without a deal.
At the beginning of the week, corrective movements are expected to strengthen national currencies – the dollar will weaken a bit. But the main news will be on Wednesday – the US Federal Reserve meeting. It will decide the question of interest rate. This may strengthen the dollar again.
Against this background, the interest rate decisions of banks in England and Switzerland will further increase the volatility of currency pairs.
In addition, news on employment in England and Australia will add volatility.
Also Brexit’s endless question – this week there will again be a vote on it in the British Parliament.
Brexit questions are still unresolved and continue to have a big impact on the rate of major currencies. This week is expected to stabilize the US dollar. This is due to the uncertainty of the outcome of the future, perhaps a three-day Brexit vote. At the first stage, on Tuesday, the English Parliament will hear new proposals for secession from the EU from Prime Minister Theresa May. She must agree them with the European Commission before Monday – this is the ultimatum period, otherwise European leaders will refuse any negotiations on this topic.
If Parliament is not satisfied with the version of the submitted document, there will be two days, during which a decision will be made to withdraw without conditions or to extend the Brexit deadline, which ends on March 29.
The ultimatum of the European Union will be explained by the imminent budget problems of Greece and Italy; on Monday, the finance ministers of 27 countries will try to resolve these issues. If Greece is ready for dialogue, then negotiations with the Italian Cabinet of Ministers are complicated by the presence of “populists” in it, bound by election promises of social benefits.
From March 4 to 8, the movements of currency pairs will be determined by the following economic news:
- Events in the “hot spots” – Venezuela, Pakistan and India. Here the conflict can even reach the use of nuclear weapons.
- Also, everyone is waiting for information about the date of the meeting of the leaders of the United States and China.
These events can be attributed to unpredictable factors.
The most important milestones of the week will be:
- Meeting of the European Central Bank;
- Minimize the loan program of the Ministry of Finance and the US Federal Reserve.
Mario Draghi has to make a decision on extending the LTRO – a program to support banks with long-term loans with lower interest rates – after 2021. Despite the long-term implications of the outcome of the ECB meeting, traders will reduce the volume of euro purchases now.
This factor may not lead to the strengthening of the dollar due to the achievement of the sovereign debt ceiling by the US Treasury after March 1. The termination of loans from open markets will lead to an excess of dollar liquidity, weakening the US currency. Its growth at the end of the week can be provided by comparing the economic indicators of the leading economies of the world, if these indicators are in favor of the United States.
Oil traders should think about hedging purchased futures: in the first week of March, the US Department of Energy will offer 6 million barrels of “black gold” from strategic reserves to the markets.