Overview of the foreign exchange market on 12/12/2018

The fall of the pound and the single European currency continued, as no one heard any positive news on Brexit. Theresa May said that she intends to meet with the heads of the countries of the European Union to try to get a better agreement that can satisfy the whims of the British parliamentarians. At the same time, it was announced that the vote on the issue of an agreement with the European Union is scheduled for January 21. That is, Theresa May has almost a month to reach new agreements. However, less than a month, because you should not forget about Christmas and New Year, and many are already not up to talking about Brexit and the like. Everyone wants to relax. The most important thing is that, despite the positive words of the Prime Minister, they did not inspire investors. After all, the European Union has already adopted the current version of the agreement, and now they are invited to throw it in the trash and negotiate again, adding some additional parameters to it. Moreover, no one guarantees that what the English desire is what suits the Europeans themselves. The current version of the agreement suits them completely, because it creates economic preferences for them, due to the absence of any trade points in the agreement. An attempt to clarify this issue, especially those that will allow British companies to work freely on the continent, as if there was no Brexit, most likely, will meet serious resistance. It is obvious that Italy or Spain, which have been experiencing economic difficulties for a long time, are interested in British companies moving aside and giving way to their own manufacturers. Yes, and the Europeans will look very stupid. At first pompously accepted the agreement, and then accept a completely different. British parliamentarians, who are more and more persistently talking about a vote of no-confidence in the government and the prime minister, are adding fuel to the fire. That means Theresa May's resignation. This is not surprising, since the parliamentarians have every reason to believe that Theresa May will negotiate anything but trade. After all, she said in plain text that the issue of the border between Northern Ireland and Ireland needs to be resolved, while in Parliament, it is more concerned about trade conditions.

At the same time, the single European currency had its own reasons for the decline related to the ongoing protests and demonstrations in France. Although the Government of the Third Republic has already canceled the decision to raise taxes from January 1 of next year, the protests continue, and the heat of the passions is only growing. In particular, there were reports that in Strasbourg, everything turned even to the death of several people. So it is not surprising that Macron was forced to impose a state of emergency. Such events do not add confidence to investors. As they say, money loves silence. It is not surprising that, against this background, the data on producer prices in the United States remained unattended, the growth rates of which slowed down from 2.9% to 2.5%. Even quite good data on the labor market in the UK was of little interest to anyone.

However, such a significant decline in the euro and the pound can not last forever. The rebound was brewing yesterday, but for a number of reasons listed above, it had to be postponed. Today, data on inflation in the US is being published, which should slow down from 2.5% to 2.2%, and this is against the background of the Fed's recent hints that there is a chance that the refinancing rate will remain at the current level. And although stock market indices have begun to recover, yet another slowdown in inflation indicates growing risks that this process may be protracted. So fears that the Fed will revise its plans are not unfounded.

Of course, in Europe, there will still be published data on industrial production, but very few people will pay attention to them. Yes, and they will not be able to bring optimism, since the industry is expected to slow down from 0.9% to 0.8%. But US inflation is an excellent reason for the correction, so that the single European currency can rise to 1.1375.Although in the UK now is not up to inflation in the United States, investors will still be repelled by it. Yes, and ask for a rebound by itself. It is already knocking on all the doors. So the pound has a good chance to grow to 1.2525.The ruble against the background of such enchanting events in the West and in the absence of aggressive rhetoric from overseas feels quite confident. True, it does not demonstrate serious attempts to grow, which indicates the limitations of this possibility. So as long as it remains stable, and as soon as the situation in Europe stabilizes somewhat, it is worth waiting for its easing. In the meantime, the dollar will remain in the area of 66.25 rubles.