Overview of the foreign exchange market on 01/30/2019

The British Parliament approved Theresa May's divorce plan with Europe and solemnly sent her to Brussels to negotiate a new agreement. But, judging by the reaction of the market, it was not very impressive. Not only that, there is almost no time left, since the Prime Minister said that in any case, Brexit will take place on March 29. But up to this time, it is necessary to try to reach new agreements with the European Union. British media propaganda and misinformation have even begun to talk about how much continental Europe will suffer from the exit of Great Britain from a European hostel. Apparently, trying to have a psychological impact, although before that the conversations were completely different, about how much the British economy would suffer. But the thing is that Europe does not intend to make any changes to the existing version of the agreement, which all countries of the European Union approved at the end of last year. Representatives of the European Commission have repeatedly stated that this option is the best that Europe can offer the United Kingdom. So British politicians can beat themselves with their heels to their chest as much as they wish and swear on blood that now they will just bring a magical agreement. Europe is just parallel. Europeans do not intend to make concessions regarding trade, as they plan to use Brexit to oust British capital from the European market. Many European Union countries need to rectify their own economic situation, and an increase in the market share of their companies can contribute to this. So it is no wonder that the pound after this news went down.

Today, all attention to the meeting of the Federal Commission on open market operations. Although it is not the meeting itself that is of interest, the subsequent press conference, in the course of which the answers to crucial questions are expected from Jerome Powell. The bottom line is that, following the December meeting, the Fed revised its plans for the rate of increase in the refinancing rate for the current year, and instead of three increases, it is now expected only two. But the whole point is that there was no specificity regarding the approximate dates of these very increases, and macroeconomic reference points were not voiced, the fulfillment of which is necessary for such events. As a result, if you look at interest rate futures, then at the moment, almost no one even believes in one increase in the refinancing rate until the end of the current year. So Jerome Powell is expected to answer precisely these questions, and, most likely, we will get them. After all, in the leadership of the Federal Reserve System, not fools are sitting, and they are well aware that it is extremely dangerous to keep markets in the dark since it is precisely uncertainty that scares the most. And fear is a terrible thing, and scared people can do a lot of stupid things. The better understanding of what will be bad, rather than complete ignorance. And most importantly, the situation with interest rate futures indicates that the two refinancing rates have not yet been laid in the value of the dollar, and as soon as investors receive answers to their questions, the dollar will begin to confidently go up.

Thus, at the very end of the trading day, the single European currency will have to go down to about 1.1375.

The pound is under pressure because of what is happening around Brexit, and the specifics with the plans of the Federal Reserve System will be just one more blow to its positions, and it will have to go down to 1.3000.