Overview of the foreign exchange market on January 16, 2019

There is nothing surprising in the fact that the parliamentarians yesterday rejected the proposed version of an agreement with the European Union because this is exactly the same document that they threatened to roll a month ago. Then Theresa May swore and swore that she could convince Europe to add additional points to it, which is a stumbling block. But things are there. The only thing that the Prime Minister was able to achieve during this time was the promise of Jean-Claude Juncker to work out the economic part of the agreement as soon as possible. British parliamentarians are well aware of what the promises are worth, since the UK itself regularly violates them, and expressed their categorical disagreement with such a scenario. In principle, everyone expected it, which was evident from the dynamics in the foreign exchange market, when both the pound and the single European currency were actively falling since the morning. As soon as the final results of the voting became known, the pound promptly returned to the position from which it began the day. Many expect that the yesterday's fiasco will be the reason for the rapid and tough negotiations and that Europe will make concessions and will include in the text of the agreement an economic component, and moreover, arranging the UK. However, this is unlikely, as representatives of the European Union have already stated that they are very disappointed with the outcome of the vote, but the current version of the agreement is the best that they can offer to the United Kingdom. That is, no one in Europe intended to include trade issues in the agreement. And this is equivalent to the fact that the UK will leave the composition of a united Europe without any agreement. And judging by the reaction of market participants, while they do not want to listen to representatives of the English political class, who predict Britain economic chaos in the event of a similar outcome.

The single European currency behaved quite differently, which seems a bit strange. True, all questions are removed if you pay attention to the words of Richard Grenell. The United States Ambassador to Germany in recent days has become the protagonist of all news feeds. The letters he sent to German companies involved in the implementation of the Nord Stream - 2, caused a storm of criticism and outrage throughout Germany. The representative of Washington, whom the Foreign Minister of Germany jokingly called the "governor of the emperor of Washington", commented on this whole situation, once again assured that companies that are engaged in the implementation of this project, which by a strange coincidence, competes with American attempts to supply gas to Europe, at risk of being subject to US sanctions. Moreover, Mr. Grenell stated that this project is not commercial, but is being implemented in order to supply gas to Europe bypassing Ukraine. True, the US ambassador did not clarify that the American plans for the supply of LNG to Europe also do not imply unloading at Ukrainian ports. Apparently, American plans are also not commercial? But then why is their gas so expensive? So it is clear that the United States intends to use political pressure to achieve its business goals, even if these methods are contrary to the principles of fair competition, which the United States of America has appointed themselves as advocates for. Well, the bottom line is that investors' concerns about possible US actions towards Europe clearly reduce the attractiveness of the single European currency.

Against the background of such epic events, data on producer prices in the USA turned out to be completely unnoticed. Moreover, there was nothing to look at, since their growth rates remained unchanged.

Today there are only data on inflation in the UK, which should show its decline from 2.3% to 2.1%, and this may be the reason for the return of the pound to those positions that were before yesterday's vote. After all, a decrease in inflation indicates a decline in profitability and return on investment, which will force many to think about the horrors that some British politicians diligently draw when talking about the consequences of the UK leaving the European Union, without the economic part of the agreement. By the way, the topic of Theresa May's resignation has not yet been worked out, since last night they again spoke about the fact that the Prime Minister is not doing her job and she should step aside.

The single European currency is likely to consolidate at current levels. On the one hand, it is oversold, but the situation around Brexit will exert pressure, not allowing it to correct and eliminate imbalances.

Factors such as lower inflation and the next threat of government resignation are unlikely to please anyone, so the pound will decline to 1.2775 - 1.2800.

The ruble, on the other hand, is trivially ignoring everything that happens, and even the US's threat against the German companies involved in the implementation of the Nord Stream 2 was not impressed. This is largely due to the fact that the share of foreign capital in the domestic financial market has declined significantly, which makes it less susceptible to external factors. Nevertheless, since the beginning of the year, the ruble has seriously strengthened and turned out to be significantly overbought, and a local correction is needed. The weak position of the single European currency and the expected decrease in the pound strengthen the dollar position, which may also affect the ruble. So the dollar is likely to grow to 67.00 rubles today.