What happens to euro, the price of Brexit and Trump's rebates

13 sept. 2019

Yesterday turned out to be busy and volatile.

The ECB has eased monetary policy in the Eurozone. ECB cut the deposit rate by 0.1% to -0.50%, announced new purchases of assets (the ECB will buy government bonds at 20 billion euros per month, starting November 1). There was a signal - weak economic data: industrial production in the Eurozone in July fell by 0.4% (analysts expected a decrease of only 0.1%).

Not surprisingly the euro fall against this background. Actually, in yesterday’s review, we predicted such a development of events and recommended selling the euro. So those of our readers who follow our recommendations should have made good money on euro sales.

The amazing thing started after has gone down by more than 100 basis points. After Mario Draghi said that the probability of a recession is low, the euro went up. Despite this growth, we believe that the euro should be sold. In the end, on one side - facts (lower rates and buyback program expansion, weak economic data), and on the other - the words that everything is not that bad. So today we will sell the euro. First of all, against the yen and the pound.

It was possible to earn on gold purchases yesterday. As we predicted, difficulties gold experienced were temporary and yesterday's growth is evidence of this.

Gold growth took place from the information that Trump has delayed the use of part of the tariffs, and China has expressed its willingness to buy agricultural products from the United States. But even this could not stop the growth of gold. The same with the euro, Draghi's comments have so far turned the situation upside down. We do believe that the decline in gold value last night is a great opportunity to buy it cheaper.

The UK government considered the possible consequences of a no-deal. In general, everything turned out to be not that good: lack of food and fuel, job loss, riots, problems in logistics, the closing of several oil refineries and so on. Once again confirms that the deal is important and needed. So the recommendation to buy the pound remains relevant.

Also, data on consumer inflation in the US were published yesterday. They are very important since next Wednesday the Fed will announce its decision on monetary policy parameters.

According to published statistics, US consumer inflation in August was 1.7% year-on-year, lower than the Fed’s forecasts and target. This means that the Fed’s hands have been untied to lower rates on Wednesday. For the dollar as a whole, this is a negative signal, so we recommend selling it.

And a few words about the oil market. Sales in the past couple of days have been linked to Trump's hints that sanctions on Iran may be partially lifted. Since the oil market is already on the verge of surplus, the appearance of an additional 1-2 million barrels of oil per day will be a sentence for buyers