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The United States came in and left and, as if we did not need more volatility and uncertainty, we now have a split in Washington.
For once, the projections were correct: the Democrats occupied the House of Representatives, while the Republicans took the Senate. This leaves Donald Trump and his future policies in a precarious situation. Such a situation leaves Washington in a political stalemate, which will make it much more difficult for the president to enforce his agenda, which should lead to an interesting end of year and a start to next year.
The US dollar index rose after intermediate prices, despite the unstable price movement. We saw the index climb to 97.50 before finding support at 96, above which we are seeing good consolidation. I am maintaining my uptrend against the dollar and hope to see consolidation above 97 levels in December.
The US economic calendar is busy over the next two weeks; Among the key publications I look for are the reading of US GDP for the third quarter (to be released today), which is expected to reach 3.5% in one quarter. Tomorrow, the PCE deflator will be released, a measure of the pressure exerted on the prices of goods and services produced and consumed in the US domestic market.
Any beating compared to the previous year would be a good support for the purchase of US assets in the short term. Next are the minutes of the meeting of the US Federal Open Market Committee, scheduled to be released on Thursday. Watch for the US non-farm payroll report of December 7; The payroll is expected to exceed 205,000, with average hourly earnings reaching 0.3% in one month. Once again, weekly earnings growth will support long dollar positions. Finally, the US data file is completed by the publication of the global inflation of December 12.
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Midway through the United States, the currency markets have turned their attention to the UK and the EU. Over the weekend, the EU has ratified Theresa May's proposal for Brexit and attention will now shift to the UK, as Ms May embarks on an eventful campaign to gain support from her project in view of the parliamentary vote that falls in two weeks.
The first voting habits suggest that Ms. May has an ardent task ahead of opposition within her own party for this agreement to be reached. At last glance, 409 deputies currently sit on the agreement (including 90 of May's Conservative party), while 230 supported it. As with all political events today, it will be difficult to predict, but one thing is certain: the volatility of the pound butts will remain high in the first two weeks of next month.
Last month, we were expecting a GBP / USD spread to 1.27 (on November 15th, the cross fell to 1.2723 on the Dubai Gold & Commodities Exchange.) The pound was consolidated above from 1.2780 but clearly lacks an upward trend.
Persistent pessimism about Ms. May's efforts could result in a sell-off between 1.2660 and 1.2680 to the chain, with high ceilings at 1.2930. If Ms. May fails to get this agreement accepted, the Brexit negotiations would return to square one, triggering a longer-term recovery, exposing further declines in the pound that could see a move towards lower levels. 1.20 against the dollar.
With two weeks of trading to go, it would be very desirable to create short positions generating small profits throughout the week of December 10, when traders should limit their exposure to the pound sterling before the vote of the British Parliament .
Like the pound sterling, the euro remains under pressure against the greenback. At the end of the years, the common currency fell to 1.12 before rising to 1.1470. Italy's recent adoption of the EU's fiscal rules has always attracted interest from the euro. However, for the month of December, expect the euro to remain under pressure because of Brexit. In addition, the EUR / USD parity is expected to weaken, which seems more likely to rise from 1.12 to 1.15 in the coming weeks.
Gaurav Kashyap is a market strategist at Equiti Global Markets. The views and opinions expressed in this article are those of the author and do not reflect the views of Equiti.
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