Forex Analysis & Reviews: The finishing chord of Draghi put pressure on the euro (there is a possibility of limited growth of GBP/USD and correction of gold quotes)
time 25.10.2019 09:15 AM
time Relevance up to, 26.10.2019 09:09 AM

The events of Thursday fully demonstrate the dichotomy of the situation in the world markets, which are still held hostage by a number of reasons which cause high volatility.

On Thursday, ECB's meeting on monetary policy took place. It was the last for the outgoing president of the bank M. Draghi. The European regulator left interest rates unchanged as expected, but at a press conference, Draghi described the prospects for the European economy pessimistically and reported on the need for an ultra-soft monetary policy amid "substantially outweighing the risks". In fact, he gave his successor C. Lagarde the order to stimulate the economy with the possibility of adjusting the situation if inflation in the region is reviving.

Also yesterday, data were published on the US economy, which caused a mixed reaction in the markets. According to the data presented, basic orders for durable goods, as well as their volume, fell more than expected. On a monthly basis, orders fell 0.3% in September against the August value of 0.3% and the forecast for a decline of 0.2%. The volume, on the other hand, fell sharply by 1.1% against expectations of a decline of 0.5% in September and growth in August by 0.3%.

In the wake of these data, gold quotes broke out of the narrow range in which it had been for the past two weeks, but at the same time, paradoxically, this growth was not supported by either a weakening yield on American treasuries (the yield on 10-year securities grew) or the appreciation other defensive assets are the yen and the Swiss franc. It should also be noted that the trading volumes were not any significant. It seems that someone was actively buying gold, taking advantage of the low activity on this asset in recent weeks due to the uncertainty surrounding the resolution of the situation on Brexit and trade negotiations between the US and China. Moreover, it should also be noted that the growth of quotations of the "yellow metal" did not "beat" with a local strengthening of the dollar, as evidenced by the dynamics of the dollar index ICE.

And still, American statistics could not spoil the mood of the investors in the stock market in the States, where generally, positive moods reigned, supported by excellent corporate reporting by Microsoft and PayPal, whose stocks increased by 2.0% and 8.6%, respectively.

Today, the attention of the market will be drawn to the meeting in the EU on the Brexit issue. If a decision is made on the postponement, this may provide local support for the pound rate and, quite possibly, slightly push down the gold quotes.

Forecast of the day:

GBP/USD is trading above the support level of 1.2840. If a decision is made today at the EU summit to postpone Britain's exit from the EU until the beginning of next year, this could support the pair, and it will grow to 1.3000.

The inability of gold to grow above the level of 1510.00 and a decline below the level of 1500.50 may return quotes to the previous range of 1476.80-1495.50.

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Pati Gani,
Analytical expert of InstaForex
© 2007-2022

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