​Euro and Pound Strengthened, but Downside Risks Remain (Weekly Review)

Last week USD bearish sentiment prevailed on the financial markets. The euro and the British pound tried hard to push it through important levels of resistance, and both currencies succeeded to some extent. Important for the EUR/USD was resistance around 1.1480-1.1500, which was broken through, but with the interest rate differential, weak statistics for the Eurozone, low inflation and political risks on the growth to the level of 1.1569 the EUR was sold, and it is again traded below 1.1480, therefore, we still cannot predict any improving of its prospects.

The British pound was able to break through resistance around the 28th figure only after rumors about a possible reschedule of the official date of Brexit, which may give Teresa May more time to reconcile controversial issues with the EU, although in Brussels they repeatedly made it clear that there would be no more concessions. In general, market participants expect a voting in the British Parliament on an agreement between the UK and the European Union, and further dynamics of pairs with the British pound will depend on its results.

Along with the ongoing US trade negotiations with the PRC, the stock markets showed positive dynamics, and it had a negative impact on the dynamics of the Japanese yen. Paired with the JPY, the USD was able to achieve resistance around the 109th figure, but was sold here, which brought it back to the support of 107.80. In the absence of progress in negotiations, the Japanese yen will be bought out during recessions across the entire market, but positive results may help to maintain pressure on it.

Schedule for this week:

Monday, January 14
10:00 GMT – Eurozone. Industrial Production (MoM) (Nov).

Tuesday, January 15
21:00 GMT – New Zealand. NZIER Business Confidence (QoQ) (Q4);
00:00 GMT – United Kingdom. British Parliament’s voting on Brexit;
01:30 GMT – PRC. Producer Price Index (PPI) (YoY) (Sep);
10:00 GMT – Eurozone. Trade Balance (Nov);
13:30 GMT - USA. Producer Price Index (PPI) excluding food products and energy products;
13:55 GMT - USA. Redbook Index;
15:00 GMT - Eurozone. European Central Bank President Draghi Speaks.

Wednesday, January 16
23:50 GMT – Japan. Core Machinery Orders;
07:00 GMT - Germany. Harmonised Index of Consumer Prices (HICP);
07:00 GMT - Germany. Consumer Price Index (CPI);
09:30 GMT - United Kingdom. Consumer Price Index (CPI);
09:30 GMT - United Kingdom. Core Consumer Price Index (CPI);
13:30 GMT - USA. Retail Sales ex Autos.

Thursday, January 17
23:30 GMT - Australia. Westpac Consumer Sentiment;
00:30 GMT - Australia. New Home Sales;
00:30 GMT - Australia. Invest Housing Finance;
G20 Meeting;
10:00 GMT – Eurozone. Consumer Price Index (CPI);
10:00 GMT - Eurozone. Core Consumer Price Index (CPI);
13:30 GMT - USA. Initial Jobless Claims;
13:30 GMT - USA. Philadelphia Fed Manufacturing Index.

Friday, January 18
21:30 GMT - New Zealand. Manufacturing Purchasing Managers Index (PMI);
23:30 GMT - Japan. National Consumer Price Index (CPI);
23:50 GMT - Japan. Foreign Investments in Japanese Stocks;
23:50 GMT - Japan. Foreign Bonds Buying;
04:30 GMT - Japan. Industrial Production;
G20 Meeting;
09:30 GMT – United Kingdom. Retail Sales;
13:30 GMT – Canada. Consumer Price Index (CPI);
13:30 GMT - Canada. Core Consumer Price Index (CPI);
14:15 GMT – USA. Industrial Production;
14:15 GMT - USA. Capacity Utilization Rate.

Author: Anthony Porter, IAFT Analyst