15.11.201809:38 Forex Analysis & Reviews: Euro and sterling have no reason for strong growth

The optimistic statements by the Prime Minister of Great Britain T. May, that an agreement could be reached on the country's withdrawal from the EU, once again inspired the markets and pushed up the rates of sterling and the single currency, which in recent days have significantly sagged against the US dollar.

The Brexit theme as a broken old record reminds of itself from time to time, inspiring investors, and, conversely, plunging them into pessimism. This week, she again reminded herself that supposedly, a definitive agreement could already be reached on the conditions of the transitional period and further relations between Britain and continental Europe represented by the EU. This news has pushed up the sterling rate and for the company, the single European currency.

But, despite this, it seems to us, this growth was more associated with the local weakening of the dollar, which they began to sell, taking profits, using the news as a pretext. The British currency has grown, pulling up and the euro.

The question arises, will the upward trend of both the euro and sterling continue? We have big doubts about this. Recent economic statistics indicate that the economies of Britain and the eurozone are slowing down, as is the slowdown in inflation. The main reason is still the situation around the dollar. It is being bought and sold against major currencies, in response to the Fed's desire to continue to follow the path of higher interest rates, domestic political events in the States and its function of currency shelter. In addition, using traditional logic, investors believe that in countries whose currencies are major and are trading on Forex against the dollar, they will eventually start raising interest rates, which will make investments in assets denominated in these currencies profitable.

Yes, of course, the logic is clear, but now the picture is not quite ordinary. It seems that at the end of the 10-year economic cycle of the Central Bank of these countries will face a wide problem, weakening economic growth, slowing inflationary pressure and, as a result, missed opportunities to prepare for a new crisis with higher interest rates. So far, the Americans have only succeeded. It should also be borne in mind that, unlike other world central banks, the Fed is persistently implementing its plans to raise interest rates. It is expected that at the end of December, they will be raised again, which will undoubtedly support the rate of the American currency.

Forecast of the day:

The currency pair EUR / USD is trading above the level of 1.1300. It may still grow to 1.1360, but if the data on consumer inflation in the US turns out to be strong and the price cannot overcome this mark, the pair may turn around and rush to 1.1300, and then to 1.1220.

The currency pair GBP / USD is trading below the level of 1.3035. A similar picture will be in this pair. Against the background of probably strong data from the US, the pair may fall to 1.2840.