Markets awaiting new landmarks
The volume of industrial production in the euro area increased by 1.3% in May compared to the previous month. The year-on-year growth was 2.4% and both indicators significantly exceeded the expectations of experts.
Indicators were surprisingly quite strong, since there has been a noticeable slowdown in business activity since the beginning of the year. The GDP growth in the eurozone may be higher than forecast quite recently.
Nevertheless, the euro is unlikely to take advantage of the unexpected present condition. On Wednesday, July 18, an inflation report will be published that will show how confident is the ECB. Besides, there is no clarity about Washington’s protectionist plans. The declared trade war between the US and China may not progress. on Thursday, both sides cautiously began to express the intention to negotiate. Accordingly, a powerful driver in favor of strengthening the dollar may lose its power.
Fed Chairman Jerome Powell commented on Thursday the development of the situation on duties, noting that in the end that the trade war will be a negative factor for the US economy. The Ministry of Trade reported a noticeable drop in foreign direct investment in the US in 2017, a decrease of 32%, or $ 120 billion.
The EUR / USD pair does not have an explicit direction at the moment. There is a high probability for the trades to continue in the formed range. he euro may fall to 1.1622 by the evening of Friday and the upper limit of the range is limited to the level of 1.1705.
Brexit recently cost the office of two ministers with Theresa May, where the arkets welcomed the news that the government will present a set of proposals to the EU in the form of a “white book”, regarding the intentions of the report. The UK is looking for a way to minimize the negative consequences of Brexit to a minimum, and if proposals are accepted by Brussels, it will have a positive impact on the pound quotes.
The new Minister for Brexit Affairs, Dominic Raab, speaking before the Parliament, said that he expects a positive response from Brussels in the near future. Negotiations have obviously dragged on, and if everything goes according to the plan, the pound will receive a positive impulse.
Next week, the results of the June inflation and data on the labor market from the period of March to May will be published. Forecasts are favorable and inflation is expected to rise to 2.5% year on year and to maintain positive dynamics in the labor market. These expectations are based, among other things, on the NIESR report, which noted positive changes in the economy. Although, these are acknowledged that they are still too weak.
With the pound is under pressure, trading on Friday will pass in the lateral range.
The IEA in the next monthly report has cooled the activity of bears, declaring that production growth in Russia and the countries of the Persian Gulf is largely due to a cushion of spare capacity. Meanwhile, in other countries, there is no evidence of an increase in production. Thus, the IEA indirectly warns that the production limit can be reached very quickly, and therefore there are no objective reasons for a noticeable decline in oil prices.
The oil market is seriously redistributed. The US is exerting considerable pressure on its allies, forcing them to abandon Iranian oil, primarily in Japan and South Korea. More and more talk about the possibility that OPEC in the current form can seriously transform itself, and Russia and Saudi Arabia will contribute to this, wherein the sum of extracting oil more than all the other parties to the agreement.
For now, we must proceed from the fact that the decline in quotes is corrective and very similar to an intermediate profit-taking. For Brent, support at 72.40 remains strong, trade with a high probability will continue above this level.
The ruble did not react in any way to the recent drop in oil and will most likely trade in the current range. Following Friday’s results, the USDRUB rate may rise to 62.70.