The British Parliament adopted the expected decision to extend negotiations with the EU on the terms of the country's withdrawal from the European Union, postponing Brexit for two months. Now, the ball is on the EU side. Be this next week on Thursday. But for now, the dynamics of the British currency is unlikely to be any definite, it will most likely consolidate against the traded currencies in the "outset".
At present, a new theme comes to the fore in the background of the intensification of trade relations between the US and the EU. It seems that the American president is confident that he will negotiate with the Chinese trade. Therefore, it turns full attention to Europe, putting pressure on it and calling for trade negotiations.
Earlier last year, Donald Trump identified important trade topics for him. First of all, these are trade relations with China and then with the European Union. "Having settled" with the Chinese, the president "took up" Europe, forcing her to trade negotiations under pressure in an effort to bring about changes in the trade balance between America and the EU. In particular, it threatens to introduce a new 20% duty on cars exported from Europe to the States. So far, in any case, Europeans also threaten retaliatory measures amounting to $300 billion.
In our opinion, everything that happens will only increase tensions not only in the economic sphere of relations between Europe and the States but also political. Although, Europe is weak politically, by and large, and against the background of a pro-American political elite will surrender to victory. Europe is actually not politically sovereign but economically strongly dependent on the domestic American market. Therefore, after a period of confrontation, it is likely to back out and enter into negotiations, surrendering a number of favorable positions to the Americans.
Given this scenario, we believe that financial markets will continue to be in a fever. In the foreign exchange market, this situation will also continue indefinitely, even after the expected conclusion of a trade agreement between the US and China on trade since the European issue will come to the fore.
Forecast of the day:
The EUR/USD pair is trading above the level of 1.1300. We believe that it will continue to move within the range on the wave of growing trade tension between the US and the EU. If the price falls below 1.1300, it may decline to 1.1265 or even lower to 1.1250.
The GBP/USD pair will also remain in the "side" in anticipation of the EU decision next week on Brexit. Reducing the pair below 1.3230 may lead to its fall to 1.3100.
*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.
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