The suspension of the US government helped to strengthen the dollar and stock markets, but in fact, this is a negative factor for US assets, and this is worth remembering. Shutdown dragged on, he never was so long. The fourth week is coming, and it can cost the country more than 0.5% of economic growth. Civil servants do not receive a salary and are forced to reduce spending and investment.
This situation will not last forever, and anxiety is brewing in the administration of the US president. Tens of thousands of employees return to work and hope to pay. The White House is behaving obstinately. So, Donald Trump did not allow the Speaker of the House of Representatives Nancy Pelosi to use a military plane to visit the troops in Afghanistan after she demanded to postpone the President's annual address "On the situation in the country". How much more time Trump will keep the economy and the country in a state of uncertainty, trying to force Democrats to allocate money for the construction of the border wall is not clear.
The US currency will rise in the case of resumption of government work in the near future. If this does not happen, the dynamics of the USD / JPY pair will depend on the appetite for risky assets. Other currencies at this time will depend on their economic data. This week is expected to meet the Bank of Japan monetary policy. It is unlikely that something will change in the direction of the course, but the regulator may worsen inflation and growth forecasts for this year.
Today, Theresa May, the British Prime Minister, who won a vote of confidence earlier, should submit a contingency plan to parliament. The pound is extremely depressed and has been trading since Friday in negative territory against the dollar. It is worth noting that the sterling's response to uncertainty around Brexit was unexpected. Instead of falling, the rate rose to the highest level in 2 months, 1.30. This is due to the fact that a few days before the Brexit vote, the market already took into account the prospects for defeat. Strengthening the pound suggests that traders are counting on the extension of Article 50 and the reduction of the possibility of a "tough" exit of Britain from the EU.
As for the "Plan B", for May there is no other way out than to ask European officials for more time. Apparently, article 50 will be extended. A vote will then take place at which EU representatives will approve the request. Brexit's European Parliament Coordinator, Guy Verhofstadt, suggested that May could be the deadline. Officials fear the possible impact of the Brexit crisis on European parliamentary elections.
In addition, it will be necessary to choose which course to take in the coming months. The "Norwegian model", a permanent customs union or a new referendum. Any decision should go to the benefit of the British pound, but May made it clear that for now, you shouldn't write off the hard version of Brexit.
Today, the prime minister will submit to the parliament an updated draft of the transaction, the discussion, and vote on which will be held in the House of Commons on January 29.
Variants of the "Plan B" scenario:
- extension of article 50 and repeated referendum
- the extension of Article 50 and the gradual transition to the transaction on the "Norwegian model" or in the permanent customs union
The material has been provided by InstaForex Company -
www.instaforex.com