24.04.201805:05 Forex Analysis & Reviews: Euro, pound, oil: key factors

Eurozone

The key event of the upcoming week is the ECB meeting on April 26. ECB President Mario Draghi broke the "rule of silence" on Friday and spoke on a number of key issues. In his view, the current slowdown in the economy may be temporary and confidence in the prospects for rising inflation has increased. Draghi's speech needs to be recognized as hawkish, since the meaning of his speech is that the ECB's soft policy folding is inevitable, as evidenced by the rapid growth of yields of government bonds of the euro area countries. In particular, the rate for 10-year-old Bundes reached 0.632% today, although just a month ago it was below 0.5%.

Markit's report on business activity in the euro area confirmed some slowdown but the composite index was slightly higher than expected in the end results, showing 55.2p, which somewhat kept the euro down.

Nevertheless, before the ECB meeting, the dollar will remain the favorite, testing the EUR/USD support level for 21.50 is very likely.

United Kingdom

After forming a 22-month high, the pound sharply dived down, playing a number of negative factors.

The slowdown in the economy, which was reflected in the decline in the level of production in February, muffled labor market indicators and the slowdown in inflation was confirmed by the slowdown in retail sales. In March, the decline was 1.2% and the overall growth in annual terms slowed to 1.1%, which is clearly not enough to hope for a stable consumer demand.

On Friday, the head of the Bank of England in an interview with the BBC unexpectedly shook investors' confidence in the May rate hike, saying that there will be other meetings this year where you can take some measures. The players did not like Carney's statement because the growth of the pound was largely due to the fact that the BoE is embarking on a policy of normalization, albeit not as fast as the Fed.

Carney actually confirmed that the British economy is not growing at such a high rate to withstand the increase in rates without consequences. Inflation, obviously, will move in the direction of 2%, as the appreciation of the pound neutralizes the main factor of its growth which is high import prices.

An attempt to divert the attention from the failure of the Brexit talks has not yet succeeded. The issue of customs regulation on the Irish border has not been resolved and the withdrawal from the EU can cost the UK 10 billion dollars more than the government expects.

The pound will continue to win back the negative in the coming days, the nearest support is at the low of March 1. At 1.37, reaching the level by the end of the week looks quite likely.

Oil

Oil continues to trade in the region reached in last week's highs as the market does not generate any bearish news, except for the IMF forecast of a slowdown in industrial activity in the next two quarters.

The meeting of OPEC + ended with a statement in which the stock level was not sufficiently low, which means that before the next meeting on June 21, this factor will contribute to the growth of quotations. At the same time, there are reports of mounting problems among American shale producers, which jeopardizes forecasts of the rate of oil production in the United States.

Fundamental factors are in favor of continuing oil growth, and a number of comments by officials predicting growth of up to $ 80 per barrel do not contribute to correction. The nearest resistance is 76.5 dollars per barrel. Its achievement looks quite probable by the end of the week.