Tuesday's trading session is interesting and promises to be volatile. Equities are displaying some optimism, trying to regain the losses of Monday session, when negative economic data from China caused sale-off and risk-off mode throughout the market. As yesterday's reason for shorts came from China, so does today's growth driver which also has its roots in China.
So, yesterday’s fears on a China’s economic slowdown were effectively offset by the information that the Chinese authorities would be more aggressive with measures to support the economy, in particular, a tax-cutting program would be more aggressive. In addition, economic data showed that the level of lending in China fell less than previously expected.
However as already mentioned, the key event of today's trading session is the Brexit vote. Now there are three possible scenarios in the event of the defeat of May on the vote: 1) UK exit date March 29 will be switched to a later date, and new negotiations ahead; 2) holding a new referendum on the Brexit issue 3) the implementation of "hard-No Deal)" Brexit. GBP / USD depends on the scenario UK government will go. Here, the most likely option is the first option, which involves postponing the Brexit date and conducting new negotiations, which in general can support GBP / USD pair.
Weak economic data from Europe continues to flow. Earlier today, Germany reported that GDP growth last year slowed to 1.5%, which is the slowest pace of the German economy in the past five years.
On FOREX, euro reached $ 1.1570 last week on Wednesday. This encouraged the buyers, and many experts – we included- started talking about the exit of the market from the long-term side range of 1.1315-1.1415. Nevertheless, at the beginning of this week, the European currency came under pressure and declined in the area of 1.1440-1.1425. Generally speaking, this decrease is understandable — a correction to the first real support after a strong growth impulse. As long as the market is above 1.1400, nothing threatens the current upward momentum and the advantage is still on the buyers side.
As for the US statistics, producer prices in the United States disappointed, falling by 0.2% m / m - the biggest drop since August 2016. However, the basic producer price index disappointed more, + 2.7% y / y against + 3.0% y / y (and fell by 0.1% m / m against expectations of a growth of 0.2%), it remains at the highest level since 2011.
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