Bears for the euro and the pound are coming back?
Today, the British pound and the euro resumed the decline after a slight upward correction, which was observed earlier this week. The absence of important fundamental statistics raises again the talk in the markets about the next interest rate hike in the US, and the actions of the White House administration, aimed at tightening trade relations with a number of countries, including China, fright potential investors into risky assets.
Also, the speech of Italian Minister of Economy today did not inspire traders who expected a more positive outlook.
According to Giovanni Tria, the economy will slow down next year but the government will continue to adhere to its fiscal obligations. According to forecast, the growth of gross domestic product this year is unlikely to exceed the 1.2% level, and will be in the region of 1% -1.1% in the next year. Prior to this, the Italian government expected an increase of 1.5% this year and 1.4% respectively in the following.
Experts expect that Italy’s budget deficit next year will be 1.2% against 0.8%, as it was previously thought.
As for the technical picture, as expected, the euro/dollar were unable to get above the 1.1630 level, which led to the wave resumption of selling risky assets. The main target remains the support area of 1.1560 below, which the euro will fall to monthly lows in the 1.1530 area. Despite this, it’s too early to panic the EUR/USD buyers. It is possible that the support area 1.1580 will be the lower boundary of the new uplink, but it is necessary to close the trading day above this level.
The British pound is also down against the US dollar amid the growing likelihood of Britain’s withdrawal from the EU without an agreement, which scares off potential investors and traders. Be reminded that most recently, the government did not rule out such an opportunity for the Brexit outcome.
Commodity currencies are also falling against the US dollar. If the Australian dollar stayed at weekly highs at the beginning of the day after the statements of the Reserve Bank of Australia, then it will begin to decline following other world currencies.
Philip Lowe stated that the next change in interest rates is likely to be their increase, and the percentage of rate increase will depend on the falling rate on unemployment and inflation. However, the manager did not mention more specific terms of the increase.
According to the RBA head, the GDP growth forecasts have changed little. The economy is expected to increase by 3% this year and by 3% in 2019.
The RBA administrator also noted that the latest inflation data are in line with the forecasts, and there is no need to wait for inflation at 2.5% to raise rates.
In the second half of the day, data on US crude oil reserves are expected to put additional pressure on commodity currencies.
* The presented market analysis is informative and does not constitute a guide to the transaction.