Pound and Euro Sold on Growth (Weekly Review)

2019-01-22
After a losing voting in the British Parliament on the plan to exit from the European Union, presented by Prime Minister Theresa May, and her successfully passing the vote of non-confidence, the foreign exchange market, and in particular pairs with the GBP, returned its their usual sleepy state. Nevertheless, despite the decline in the market activity, the pound against the US dollar was able to break through to the psychological level of 1.3000, helped by market participants’ hopes of London and Brussels finding compromise solutions that would avoid a “tough” Brexit.

In general, the British pound passing the resistance level triggered execution of protective orders, which strengthened the upward impulse, while its growth did not look justified in terms of fundamental analysis, so rising activity of the bears from 1.3000 was quite logical. Thus, the GBP/USD is again traded below the 29th figure, and the further dynamics of the pair may depend on plan B, which Teresa May should present.

The euro, in its turn, could not repeat the success of the week before last and break through the resistance around the 15th figure. Weak macroeconomic statistics and low inflation in Germany and the Eurozone keep low expectations for the ECB to raise interest rates this year, which, along with political risks in Italy and France, in no way justifies the strengthening of the single European currency. Thus, its growth attempts will further to be used for sales, while there are no reasons for its large-scale decline at this stage.

Schedule for this week:

Monday, January 21
07:00 GMT - Germany. Producer Price Index (PPI) (MoM) (Dec).
USA. Martin Luther King, Jr. Day

Tuesday, January 22
09:30 GMT – United Kingdom. ILO Unemployment Rate (3M) (Jan);
09:30 GMT - United Kingdom. Average Earnings ex Bonus (3M) (Jan);
09:30 GMT - United Kingdom. Average Earnings Index +Bonus (3M) (Jan);
10:00 GMT - Germany. ZEW Economic Sentiment (Jan);
13:30 GMT – USA. Housing Starts;
13:30 GMT - USA. Building Permits.

Wednesday, January 23
22:45 GMT – New Zealand. Consumer Price Index (CPI);
23:50 GMT - Japan. Trade Balance;
23:50 GMT - Japan. Import/Export;
02:00 GMT - Japan. Bank of Japan Interest Rate Decision;
02:00 GMT - Japan. Bank of Japan Press Conference and Monetary Policy Statement;
04:00 GMT - Japan. Bank of Japan Press Conference.
13:30 GMT - Canada. Retail Sales ex Autos;
13:30 GMT – Canada. Retail Sales.

Thursday, January 24
23:50 GMT - Japan. Foreign Investments in Japanese Stocks;
23:50 GMT - Japan. Foreign Bonds Buying;
00:30 GMT – Australia. Unemployment Rate;
00:30 GMT - Australia. Participation Rate;
Switzerland. The World Economic Forum in Davos;
08:39 GMT - Germany. Markit Services Purchasing Managers Index (PMI);
08:39 GMT - Germany. Markit Manufacturing Purchasing Managers Index (PMI);
09:00 GMT – Eurozone. Markit Composite Manufacturing  Purchasing Managers Index (PMI);
09:00 GMT - Eurozone. Markit Manufacturing  Purchasing Managers Index (PMI);
12:45 GMT - Eurozone. ECB Interest Rate Decision;
13:30 GMT - Eurozone. ECB Press Conference and Monetary Policy Statement;
13:30 GMT - USA. Initial Jobless Claims;
14:45 GMT - USA. Markit Manufacturing Purchasing Managers Index (PMI).

Friday, January 25
23:30 GMT - Japan. Tokyo Consumer Price Index (CPI), excluding fresh food;
Switzerland. The World Economic Forum in Davos;
07:00 GMT - United Kingdom. Manufacturing Production;
09:00 GMT - Germany. IFO Business Expectations;
09:00 GMT - Germany. IFO Current Assessment;
13:30 GMT - USA. Durable Goods Orders;
15:00 GMT - USA. New Home Sales;
19:00 GMT - USA. Budget Balance (Dec).

Author: Anthony Porter, IAFT Analyst

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