Today, the currency market is expected to experience an increase in volatility, especially among dollar pairs. Key data on US inflation will determine the vector of dollar movement, while influencing the US stock market. On the one hand, in such conditions there is a certain temptation to "break the jackpot" on the news, however, on the other hand, this tactic is more like a lottery game. The initial reaction of the market is deceptive, therefore, to take a deliberate decision on the release of today's data, a certain amount of time is required, within a day or two. During this time period, the market will finally comprehend the incoming data, after which the dollar will occupy the corresponding price niche.
For this reason, it is not recommended to open trading positions for dollar pairs today. Among the crosses, the most interesting situation is the euro/pound pair. The slowdown of the European economy in the fourth quarter of last year may halt the upward trend for the pair, but against the backdrop of large-scale problems in London, this fundamental factor will have a short-term impact. Moreover, the slowdown in the dynamics of GDP growth in the eurozone was expected - both in annual and quarterly terms, the indicator fell at a minimum: 0.6% q/q and 2.7% y/y.
But the German economy showed growth, exceeding in annual terms the forecast values (2.3% instead of the expected 2.2%). In general, news from Germany recently supports the European currency, despite the political difficulties. The coalition talks ended successfully, but Angela Merkel immediately fell under the pressure of criticism: the party members accused her of being too compliant to the Social Democrats (they will receive as many ministerial posts as the members of the CDU).
In turn, everything is not calm in the camp of the SPD as well. The head of the party, Martin Schultz, who was just two months ago was confirmed in his post, resigned amid criticism because of his desire to head the Foreign Ministry. Now the SPD will decide the personnel issue at an Extraordinary Congress (which will be held in April), and Hamburg mayor Olaf Scholz will be the acting head of the party. However, the confusion regarding officials is unlikely to prevent the coalition from creating a government - this is the word among rank-and-file Social Democrats. According to German experts, the majority of 440,000 members of the SPD will support the coalition agreement (in the near future the treaty will come to each of them by mail), since otherwise the country will be on the verge of a large-scale political crisis. Yes, and re-election to the Social Democrats unprofitable: recent sociological measurements indicate a significant reduction in the rating of this party.
Thus, the "locomotive" of the European economy demonstrates not only economic growth, but also political (relative) stability. This factor is not enough for the growth of the European currency paired with the dollar, but paired with the pound, this argument has considerable weight.
Britain continues to live in conditions of uncertainty amid the rapidly changing information background. Almost daily, there is quite conflicting information about the possible prospects of the negotiation process for Brexit. The market did not have time to react to the statement of representatives of the Spanish Foreign Ministry about the priority of the "soft" scenario of divorce from Britain, as the official negotiator from Brussels voiced extremely harsh conditions for the transition period. The traders did not have time to react to Theresa May's statement about the desire to maintain access to a single market, as the press got the opposite information. In an addendum Brussels threatened with sanctions for non-compliance with the conditions of the transition period. And these conditions, in turn, are openly unacceptable for London.
Such a tangle of fundamental factors exerts constant pressure on the pound. Interest in the British currency is fueled only by the "hawkish" mood of the Bank of England, which, contrary to all, said about the possible acceleration of the rate of tightening of monetary policy. The release of the latest data on British inflation (the figure came out better than the forecasts) only increased demand for the pound, but the aggressive statements of Brussels and London restrain the growth of the British currency. Oils were poured in the fire due to the report on the website of The Best for Britain Group, according to which Britain will lose 350 billion dollars (albeit within 15 years), if the country withdraws from the EU without a deal. Similar apocalyptic scenarios appear quite regularly, but in this case the report affected the pound, as the amount of damage was based on the leakage of government information.
In the next two weeks, British Prime Minister Theresa May will deliver a two-day speech on the prospects for Brexit. The first round is scheduled for Saturday, the date of the second round of talks has not yet been determined. It is obvious that she will voice the position of Britain on the eve of the beginning of the second stage of the negotiations. Depending on the tone of her rhetoric and readiness for compromise, the pound will choose the direction of its movement. Until then, the British currency will be pressured by the uncertainty factor.
From a technical point of view, the euro/pound pair is in the uplink. The pair demonstrates a noticeable bullish trend, as evidenced by the Ichimoku indicator Kinko Hyo, which formed its strong " Parade Line " signal. Also, the price tests the top line of the Bollinger Bands indicator, which is in the extended channel. Confirmation of the trend indicators is the MACD oscillator, which is in the oversold area. The support level is the upper limit of the Kumo cloud on the daily chart and 0.8850. But the nearest northern target is the level of 0.8990 - this is the top line of the Bollinger Bands indicator on the weekly chart, which coincides with the Kijun-sen line of the Ichimoku Kinko Hyo indicator.
