US GDP, reaction of the Fed, euro under pressure and Brexit

29. März 2019

Thursday quite unexpectedly turned out to be volatile for financial markets. The data on US GDP for the fourth quarter were revised downwards and in general were worse than expected. The figures from the Eurozone are excellent, but relative to the US GDP this is a failure (the rate of 4.2% of quarterly GDP growth in summer 2018).

Despite the growth of the dollar yesterday, we recommend looking for points for its sales on the intraday basis. Recall that now the economic data from the United States are twofold. On the one hand, the data characterize the economy, and on the other hand, it signals the Fed about what to do with monetary policy. So, the weak data is a signal not only to keep the growth rate at a pause, but even a reason for lowering the rates. And this is definitely against the dollar. Returning to yesterday's dollar growth, we note that this was partly due to the optimistic statements of John C. Williams the president and chief executive officer of the Federal Reserve Bank of New York, who said that the likelihood of a recession in the United States is now the same as a year ago.

Brexit is stalled. Parliament is clearly unable to take any decision. On the one hand, “hard” Brexit does not suit parliamentarians, but on the other, any other alternative, too. May’s third vote plan left undefined. The fact is that the vote on the transaction should take place this week, it means today. But there is no certainty that it will take place.

Recall, John Bercow, the speaker of Britain's House of Commons, said that PM cannot bring back deal to parliament without substantial changes. Sum up the pound could not withstand such tension and fell under the pressure of the growing dollar. However, there is no real actual reason for this. So, we recommend looking for points for buying the pound on the intraday basis.

Another “victim” of a dollar was the euro. One of the reasons for the decline was the criticism by the IMF of Eurozone insecurity from a possible economic crisis. Given that the economic data from the Eurozone has recently been getting worse and worse, perhaps there’s nothing really strange about the euro falling.

We still recommend to look for points for buying gold and oil on the intraday basis, selling the Russian ruble and the dollar in the foreign exchange market.