Again, Brexit determines investor sentiment and even the outcome of the meeting of the Bank of England go unnoticed. No one even seems to have read the final press release, which once again spoke of the risks for the British economy that will come true in the event of a "hard" withdrawal from the European Union. But all these goes that Brussels agreed to postpone the resettlement of the United Kingdom from a European hostel but not until June 30, as Teresa May requests, but until May 22. Moreover, that is only if the House of Commons accepts the proposed divorce agreement. The same option that they have twice rejected and yet, the postponement of the subjects of Her Majesty are asked in order to try to agree on the entry in the text of the agreement of the paragraphs relating to trade and the border between Ireland and Northern Ireland. Hence, the decision of Europe is essentially the unequivocal answer of the UK. One ask for a reprieve as much as you like, anyway there will be no other agreement. From this it follows that all the assurances of Jean-Claude Juncker that in the shortest possible time the trade issues will be agreed but supposedly due to lack of time. This will happen only after signing the agreement but these are words about nothing. After all, the United Kingdom is asking for a postponement so that the head of the European Commission can fulfill his promise, and here it is. Hence, it is precisely the "hard" version of Brexit that is now becoming the most realistic scenario, and, given the complete lack of understanding of how this affects not only the United Kingdom but also in Europe. Everything is clear with it and it is not surprising that pound and the single European currency confidently went down.
Of course, it wasn't one of them that it showed a slowdown. Expected slowdowns of 36 thousand instead of 10 thousand. In particular, it was repeated, it was repeated, by 27 thousand. Therefore, it's not even strange to notice the situation with Brexit and its postponement. Another thing is that it shouldn't be so strong.
Today, the Preliminary data on business indices are coming out in the United States and the forecasts are rather optimistic. Hence, if the index of business activity in the services sector should remain unchanged, then the production index can grow from 53.0 to 53.6. Thus, the composite index of business activity should increase from 55.5 to 55.6. It is also expected that sales of housing in the secondary market will grow by 2.2%.
In Europe, the preliminary data on business activity indices are published as well. Although the composite index should grow from 51.9 to 52.0, this should happen only due to an increase in the production index from 49.3 to 49.5. The index of business activity in the services sector is expected to drop from 52.8 to 52.7. Nevertheless, the growth of the composite index will have a beneficial effect on investor sentiment and given the similar tone of output data in both Europe and the United States, the single European currency is likely to remain around 1.1375. The market needs to take a breath after the recent events.
In theory, the pound should somewhat weaken under the pressure of US statistics, especially since there is no data in the UK. However, after such a sharp increase and the subsequent decline, market participants need to recover. Thus, similar to the single European currency, the pound will remain in place around 1.3125.
The material has been provided by InstaForex Company - www.instaforex.com