19.03.201901:00 Forex Analysis & Reviews: Weekly review of the foreign exchange market from 03/18/2019

Speculators' dreams sometimes come true. This time, the House of Commons made it a reality, as they already voted on Brexit for three days in a row. The pound was thrown from side to side so hard that it took your breath away. At first, they once again rejected the draft "divorce" agreement with the European Union, since the descendants of the creators of the empire, over which the sun never sets, are not particularly impressed by all these Brussels promises to supplement its economic component in the near future. But this very near future will come no earlier, than when the United Kingdom signs an agreement which, in terms of trade relations, is enslaving for the island. However, the trouble is that if the UK moves out of the European "hostel" without an agreement, in economic terms, the result will be the same as with the agreement. It is banal, but there is nothing about trade and other aspects of economic relations in the agreement. Realizing all this, the next day, the people's representatives decided to legistavely exclude the possibility of a "divorce" without an agreement. A day later, they agreed that there was no time to further persuade Brussels bureaucracy, and they voted to postpone the withdrawal from the European Union to a slightly later date. Well, this is so that Theresa May has little more time for useless negotiations with Jean-Claude Juncker, who for more than two years has been skillfully evading any specifics on trade issues. Another month will not change anything, because Europe only makes promises and more promises, but is not going to make any changes to the text of the agreement. That is, no economic content of this agreement will exist.

At the same time, although all these endless voting became the cause of the ups and downs of the dollar, to be honest, all these movements fit into the logic of the released macroeconomic data. Although there were not so many of them, inflation in the United States slowed down from 1.9% to 1.5%, while the forecast was 1.6%. Indeed, from such, investors' interest in the dollar decreased slightly. At the same time, inflation in Europe accelerated from 1.4% to 1.5%. Of course, other data also came out, but their importance is sharply reduced against inflation and voting in the House of Commons, and also, few people are interested in it. But they still rather pointed to a weakening of the dollar. There are only data on industrial production in Europe, the rate of which has slowed from -4.2% to -1.1%, whereas the forecast was a slowdown to -2.1%. In Great Britain, where further deepening of the decline in the pace of growth in industrial production was expected, they remained unchanged. And although this is still a downturn in the industry, it is no longer so bad, and the trend is encouraging. But in the United States, producer price growth slowed from 2.0% to 1.9%, sales of new homes collapsed by 6.9%, and the total number of applications for unemployment benefits increased by 24 thousand. So America continues to "become great again."

Once again, we see confirmation that no matter how much they scream about political scandals, the result is still what the economy dictates, thus, it is worth considering first of all the macroeconomic statistics that will be released this week. It is the United States, due to the scale of its economy. The closest attention should be paid to the meeting of the Federal Commission on open market operations. It is clear that everyone has already come to terms with the fact that this year the Federal Reserve will not raise interest rates, but after the European Central Bank, in fact, resumed the program of quantitative easing, there are suspicions that the US regulator will present a surprise. It is possible that the Federal Reserve is announcing measures to mitigate monetary policy, which may come into force later this year. And it is clear that after such, the dollar will have little reason for growth. Even macroeconomic statistics, which are expected to be quite good, will not be able to change investor sentiment. After all, the data is not the most important. Thus, production orders may increase by 0.3%, and housing sales in the secondary market by 2.2%. The number of applications for unemployment benefits should decrease by at least four thousand. Indeed, and preliminary data on indices of business activity, most likely, will show growth.

In Europe, nothing at all comes out, except for preliminary data on business activity indices, which, as expected, despite the decline in the services sector from 52.8 to 52.7, will generally show growth. After all, the business activity index in the manufacturing sector may increase from 49.3 to 49.5, and this should be enough for the composite index to rise from 51.9 to 52.0. Thus, it is likely that the single European currency will strengthen to 1.1425 - 1.1450.

The main event in the life of Her Majesty's subjects will be another vote in the House of Commons. The MPs will once again vote on the divorce agreement with the European Union. That is, the rejected projected will be considered again for the third time. After all, it is obvious that no one had time to make any changes to it in a week. And even Europe, even on pain of death, does not intend to change anything there. But British MPs need to approve the very concept of the agreement in order to delay the date of such a long-awaited divorce. And although the overwhelming majority of MPs voted to delay the release date from the European Union, exactly the same majority had twice already rejected this agreement. So the result is completely unpredictable. But it is obvious that if the House of Commons votes in favor, then the pound will once again fly up. But do not forget about the meeting of the Board of the Bank of England, which miraculously takes place only a day after the vote in the House of Commons. As if the date of the vote was specially selected in such a way that Mark Carney was even more convincing in his horror stories about the economic collapse in the event of a "hard" Brexit or didn't say anything at all. And of course, that no one in their right mind would now touch the refinancing rate itself. There are no hints. Although both of these events clearly attract all attention, do not forget about inflation and retail sales. Here, everything is very sad and although inflation should remain unchanged, the growth rate of retail sales can slow down from 4.2% to 3.4%. And this is not taking into account the expected slowdown in the average wage growth, taking into account the premiums from 3.4% to 3.2%. That is, from the point of view of investors, what's worse is not only that consumers do not want to go to stores, because they are such scoundrels, they don't want to recycle. The House of Commons and the Bank of England will determine the direction of the pound. And frankly, the probability is high that for the third time, and with a number of reservations, the MPs will accept the agreement. After all, to be honest, with this agreement, without it, it makes absolutely no difference for the British economy. Thus, there will be a reason for the pound to increase to 1.3350.