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20.11.201709:49 Forex Analysis & Reviews: Political crises in Europe - a bad condition for the euro's growth

Long-term review
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EUR/USD, GBP/USD

On Friday, the euro and the pound closed the day with a slight increase on the wave of uncertainty over Trump's election team due to the investigative commission of R. Muller, who is conducting a probe into relations with Russia - members of the Trump team received subpoenas. In our opinion, this case should stop with the adoption of the Tax Reform Congress. By all external signs, the consensus on the members of the Fed has been reached, the US general line for the East remains and Trump does not face any more threats.

The eurozone's balance of payments for September pleased European investors: 37.8 billion euros against the forecast of 30.2 billion euros and 34.5 billion euros in August, revised to increase from 33.3 billion euros. The growth of the British pound stopped during the middle of the day due to the statement of Secretary of State for Brexit D. Davis regarding the obstruction by Germany and France of the negotiation process.

In the US, the number of new housing starts for October, as we expected, exceeded expectations: 1.29 million y/y against the forecast of 1.19 million y/y and 1.14 million y/y in September. The number of issued permits for the construction of a new house increased from 1.23 million to 1.30 million. The pressure on the dollar was also caused by the stock market - the S&P 500 lost 0.26% amid pending further changes in the consideration of the tax reform by the Senate.

The new week began with active lowering of counter dollar currencies. Angela Merkel failed to agree on the creation of a parliamentary coalition, which makes it impossible to form a permanent government. However, most importantly, there is a basis for re-elections, after which Merkel may not become the chancellor. Expectations of an increase by 0.2% in the German producer price index for October, the US index of outperforming economic indicators may be overtaken for the same month, the forecast for which is at 0.6%. Mario Draghi is currently delivering a report to the European Parliament's Committee on Economic and Monetary Affairs. We believe that the speech will be neutral. This is because on Thursday, the ECB protocol from its last meeting will be published.

On Thursday, the completion of speculation on the euro was mentioned. Today's events have confirmed this conclusion, the euro is expected to be at 1.1580, afterwards in the range of 1.1485-1.1510. For the pound, we are waiting for the price at 1.3080, then at 1.3030.

Exchange Rates 20.11.2017 analysis

Exchange Rates 20.11.2017 analysis

AUD/USD

For the Australian dollar, there is no reason to move against the general strengthening of the US dollar and break the trend from last week. Furthermore, there is no strength - the non-ferrous metals are getting cheaper (copper -0.46%, lead -0.40%, aluminum-1.13%), raw materials also loses its value: iron ore -0.3%, oil -0.19%, natural gas -1.66%.

The yields on Australian government bonds are declining with US stocks. The Asian stock market did not offer anything following the decline of US indices last Friday - the Australian S&P/ASX 200 is down by 0.11%, the Japanese Nikkei 225 by -0.58%. On Tuesday, the RBA will publish the minutes from its last meeting. Presumably, any new premises are unlikely to be presented. We are waiting for the continuation of the downward trend of the "Aussie" with the targets of 0.7495 and 0.7450.

Exchange Rates 20.11.2017 analysis

Laurie Bailey
Analytical expert of InstaForex
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