24.10.201814:14 Review of the foreign exchange market on 10.24.2018

Long-term review

Yesterday, the day began with a fairly vigorous growth for the pound and the single European currency, although no serious data came out. Despite the growth rate of producer prices in Germany accelerated from 3.1% to 3.2%, and, of course, it gives hope for further inflation in Europe, this is not enough for a significant weakening of the dollar. The answer again lies in Brexit, since representatives of the European Union declared that they were ready to make a number of concessions regarding the border between Ireland and Northern Ireland. Thus, this would offer the UK a more compromise version of the agreement. Of course, this pleased investors but it is still unclear whether this option suits the parliamentary majority. It seems that already firmly aimed at sabotaging Theresa May's efforts to discredit her and earn political points. Moreover, rumors about the imminent resignation of the Prime Minister of the United Kingdom and as soon as such information began to arrive, the dollar immediately began to regain the losses of the first half of the day. Also, do not forget about the problem of public debts in the euro area, as the Italian Prime Minister said that he would consider all the recommendations and observations of the European Union regarding the budget deficit, but there will be nothing to revise.

Exchange Rates 24.10.2018 analysis

Today we are waiting for a much richer day in terms of statistics. In particular, the preliminary data on business activity indices in the USA are published and if the production index reduces from 55.6 to 55.5, the index in the services sector can grow from 53.5 to 54.0. Given the much greater weight of the service sector index, the composite index is likely to grow from 53.9 to 54.3 but not without negative, as sales of new homes can be reduced by 1.4%. So the American statistics with its multi-direction is unlikely to have a decisive influence.

Exchange Rates 24.10.2018 analysis

In Europe, the preliminary data on business activity indices also come out, and the expectations here are not so optimistic since a continuous decline is predicted. In particular, the business activity index in the services sector should decrease from 54.7 to 54.5, and the production index from 53.2 to 53.0. As a result, the composite index should reduce from 54.1 to 53.9. True, optimism inspired data from France, which turned out to be better than expected. In fact, the business activity index in the manufacturing sector fell from 52.5 to 51.2 but in the services sector, it rose from 54.8 to 55.6 which led to an increase in the composite index from 54.0 to 54.3. However, the data from Germany was very disappointing, and there is a risk that the pan-European data will be worse than expected. Thus, the business activity index in the services sector decreased from 55.9 to 53.6, and production adjusted from 53.7 to 52.3. So the composite index of business activity fell from 55.0 to 52.7. It is also expected to accelerate the growth rate of consumer lending in the euro area from 3.1% to 3.2%. Hence, against the background of such weak data, it is worth waiting for the decline of the single European currency to 1.1400.

Exchange Rates 24.10.2018 analysis

No data comes out In the UK, thereby, the pound will follow the single European currency, as well as be sensitive to the latest rumors about Brexit. Although in recent days, too much has been said on this topic, British politicians have shown that they do not know how to sit quietly, especially when it comes to ousting the current prime minister and the ensuing fuss over warm places. Thus, it is worth waiting for the pound to decline 1.2900.

Exchange Rates 24.10.2018 analysis

*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.

Uitgevoerd door Mark Bom,
Analytische expert
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