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Overall picture on the currency exchange market is unlikely to change noticeably before the end of the year
On Monday, positive data on the economies of China and the US which were published support the increasing demand for stocks of companies, but do not help the US dollar. So what is the reason and what should be expected from the market before the end of this year?
Indeed, the actual data on industrial production in annual terms for the month of November, which were presented yesterday, turned out to be noticeably higher than expected. Industrial production grew by 6.2% from 4.7%, while an increase of 5.0% was assumed. In addition, the growth in retail sales turned out to be positive, which added 8.0% year-on-year in November against 7.2% and expectations for an increase of 7.6%.
At the same time, the values of American statistics were also looking good. The index of business activity (PMI) in the services sector grew to 52.2 points in December against the November value of 51.6 points and expectations of an increase to 52.0 points. Markit’s Composite Business Activity Index (PMI) added up to 52.2 points this month from 52.0 points in November, with a decrease to 51.9 points expected. However, the situation was somewhat spoiled by the data on the index of business activity in the manufacturing sector (PMI) for December. The indicator declined to 52.5 points from 52.6 points, nonetheless, it was not able to spoil the mood of investors, which is supported by the continuation of the “truce” between the United States and China in the war of customs.
More so, although the “Phase 1” agreement did not bring noticeable changes, it became the basis for the decision to postpone the increase in previously promised customs duties from both America and China. In our opinion, this topic, against the backdrop of encouraging economic statistics from China and the United States, is an incentive to increase the demand for risky assets. But at the same time, stabilization of gold prices and low volatility in the currency exchange market after the last surge caused by the final decisions of the Fed, the ECB, and the elections to the British Parliament are noted.
The reason for this is still the same – the lack of a final chord in the US-China trade war. Despite the Christmas “truce”, the problem has not been resolved. That is why we are seeing a long consolidation of gold quotes at very low volumes, and the weakness of the dollar remains unnatural after the Fed’s decision to leave monetary policy unchanged. At the moment, the dynamics of the dollar largely depends on the movement in the negotiation process. A certain positive is shown, while the dollar is growing. On the contrary, the negative creeps out; it decreases. In this regard, it is noticeably influenced by a change in the yield of American treasuries, which are reacting violently to US-Chinese negotiations.
Now, we believe that the overall picture is unlikely to change noticeably before the end of this year, given the very controversial situation in the American customs war with China and the low volatility in the currency market.
Forecast of the day:
The AUD/USD pair turned down in the wake of the publication of the minutes of the December meeting of the RBA, which confirmed the probability of another rate cut at the beginning of the new year. Thus, we believe that the pair will continue to decline to 0.6800 after crossing the level of 0.6860.
The GBP/USD pair is rolling back as fast as it was rising before the British Parliamentary elections. We believe that it will continue to fall, since B. Johnson’s “stubbornness” in Brexit’s issue, expressed in his desire to withdraw the country from the EU, will have a negative impact on the country’s economy. Thus, we expect the pair to continue to decline to 1.3160, after it fell below the previous local maximums, which are located at 1.3315.
The material has been provided by InstaForex Company – www.instaforex.com
