Review of the foreign exchange market on 11/14/2018

Of course, the dollar rebound suggested itself but what a pound did yesterday was very surprising. At the same time, there were no macroeconomic reasons for such a substantial increase in the pound. As expected, the growth rate of average wages with premiums, accelerated from 2.8% to 3.0% and in addition to this, the growth rates of average wages without premiums grew from 3.1% to 3. 2%. However, the unemployment rate rose from 4.0% to 4.1%, which somewhat overshadows optimism due to wage growth. After all, it turns out that the number of people receiving them has decreased, and the overall picture has remained unchanged despite wages have increased. So the pound, of course, had a reason for a small increase, given the overbought dollar, but not the same. The reason again lies in the ill-fated Brexit, who regularly raises a pound to heaven, it plunges into the Hyaena of Fire. This time rumors began to spread that an agreement had been reached on the border between Ireland and Northern Ireland that allegedly today, November 14, a "divorce" agreement would be signed between Great Britain and the European Union. This was the reason for the rapid growth of both the pound and the single European currency.

True, we should not forget that such rumors have already been circulated repeatedly. Officials often stated something similar in meaning and nothing has changed. Moreover, the signing of the agreement does not mean anything, since the British Parliament, which is very hostile to Theresa May, must ratify it. Thus, the optimism today regarding this issue may come to naught and be replaced by completely different moods. Moreover, someone decided to announce today's date, and if nothing happens right now, then investors will be greatly disappointed.

But even without such exciting political somersaults today, there will be a most serious reason for strengthening the dollar. We are talking about inflation in the United States, as it should grow from 2.3% to 2.5%. This will confirm the words of the representatives of the Federal Reserve System that the recent decline in inflation still does not mean anything, and one should not make hasty conclusions, as long as there is no certainty that its slowdown is sustainable. The rise in inflation in the United States removes any questions regarding future actions by the Federal Reserve System. If the forecasts are confirmed, then there will be no doubt that in December the refinancing rate will increase to 2.5% and another three times next year bringing it to 3.25%. Hence, it is quite justified to wait for the resumption of the growth of the dollar.

In Europe, there is the second estimate of GDP for the third quarter, which should once again confirm the fact of slowing economic growth from 2.2% to 1.7%. True, these data are already taken into account by the market after the publication of the first assessment so that they will not have a significant impact on the state of affairs. Under the influence of rising inflation in the United States, the single European currency will have to fall to 1.1250.

The pound also has the opportunity to resist, since in the UK inflation is also expected to accelerate from 2.4% to 2.5%. This gives hope that the Bank of England will nevertheless decide to raise the refinancing rate at the end of this year. But do not forget about the Brexit factor, and, not having received confirmation of yesterday's rumors today, investors will drastically change their attitude to the pound. Thus, it has to decline, although at first, it may even grow, we still have all the chances to see the price around 1.2950 by the end of the day.