What to expect from the EUR/USD pair or why is now not the best time to buy euros?
In the past few days, the single European currency has been in demand by investors, which is apparently explained by the outcome of the midterm elections in the United States, as well as the expectation that in the near future Britain will be able to reach an agreement with the EU on leaving the country from the alliance.
In particular, the British minister for Brexit, Dominic Raab, announced that the deal could be concluded before November 21. This news allowed traders to resume purchases of euros, pounds, Australian and New Zealand dollars.
Meanwhile, the problem of the physical border between the Republic of Ireland and Northern Ireland remains unresolved. Last Tuesday, Arlene Foster, leader of the North Irish Democratic Unionist Party, said that there is still no progress on the border issue. Hence, the negotiations between the United Kingdom and the EU are one step away from failure, which may be followed by a tough Brexit.
Regarding the results of the mid-term elections in the USA, the equally important Senate remained under the control of the Republicans, despite the prevailing view that the dominance of the Democratic Party in the House of Commons would impede the promotion of legislative initiatives by the head of the White House Donald Trump. Moreover, yesterday the US president announced his readiness to work with Democrats in key areas. Therefore, it is possible that the parties will be able to reach consensus on a number of issues, including in the field of infrastructure and health.
The situation around the budget deficit of Italy is not currently in favor of the single European currency. Given that the deadline for submission by the government of the country to the European Commission on November 13 is the finalized draft budget. If no changes are made to the document, disciplinary measures will be taken against the republic. However, even despite this, it is likely that the draft budget will not be revised.
Another argument against buying the euro is the statistics. According to Eurostat, the economy of 19 countries of the eurozone in the third quarter of 2018 increased by 0.2% in quarterly terms. The indicator showed the minimum rate of recovery from the second quarter of 2014. It leaves much to be desired and business activity. Last month, the eurozone consolidated PMI dropped to 53.1 points from September’s level of 54.1.
According to some experts, this is just the beginning. The ECB in such conditions is unlikely to tighten monetary policy, which also will not play into the hands of a strong single European currency. It is assumed that by the end of the year, the EUR / USD pair can sink to the level of 1.10.