Indeed, as we contemplate what is happening in London, I am becoming more and more convinced that this is not even a circus tent, but some kind of rural amateur art club. Great Britain, which had to vacate an occupied room in a European dormitory a week ago, seems to have begun to realize that it is moving to a country castle, but without sewage, water supply, heating, electricity and even a telephone with the internet. The butler there is such that it is not clear, whether he will have to be buried now or he just got out of the grave for the weekend. Hence, Theresa May started begging the whole European bureaucracy for a new reprieve because she remembered that in two years she hadn't talked to the parliamentary majority, who strangely didn't really like the divorce agreement. It's like the property itself somehow we grab a little upon departure. Hence, the "Iron Lady - 2.0" and Jeremy Corbin agreed on a plan for negotiations on the discussion of Brexit and they did it after the United Kingdom had already left the premises. Such a turn of events has produced such an effect on the unfortunate Brussels bureaucrats that they seem to have been speechless. As a result, the proud nobleman Donald Tusk took the initiative but has no authority on this issue. Therefore, his words should not bother anyone at all but now, the British yellow press screamed as if it were the Savior himself who brought them the good news. He said that the UK could get a reprieve for as much as a whole year and settle down at any moment, as soon as it is morally ready for it, but the trouble is that the son of the great Polish-Lithuanian Commonwealth is not authorized to make such decisions. All that is needed is to observe a small formality in the form of unanimous approval of such a brilliant idea by all countries of the European Union. The meeting of all these wonderful people is scheduled for April 10th. Jean-Claude Juncker became completely ill from everything that was going on as he already had the means to tell everyone that there would be no new delays either the United Kingdom accepts the agreement or it will be evicted on April 12 without any kind of "preliminary caresses" as a transitional period. And let them say thank you, that they will not endure with their feet ahead. Simply put, the probability of a "hard" Brexit'a does not grow from day to day but from hour to hour. However, Theresa May and Jeremy Corbin continue to talk sweetly. After all, they have something to discuss like it or not, but almost two years did not communicate.
It is not surprising that the realization of the inevitability of the "hard" Brexit while the pound gradually surrendered its positions. Yes and a single European currency too. But the funny thing about all this is that if you look at macroeconomic statistics, then this is how it should happen. That is, we get another proof that it is the economy that determines the actions of politicians. It is difficult to imagine that today's frills of the next elected representatives of the people influenced statistical data reflecting what happened much earlier and the same macroeconomic statistics showed us a lot of amazing things. Thus, the business activity index in the UK manufacturing sector increased from 52.1 to 55.1 but in the services sector, it fell from 51.3 to 48.9. Thus, the composite index increased only to 49.7 from 49.5. Therefore, it continues to remain below the critical level of 50.0 points. On the other side of the Channel, it's time to grab my head, as preliminary inflation data showed its slowdown from 1.5% to 1.4%. It became clear to everyone that the European Central Bank at least as long as Mario Draghi continues to head it will print money in the form of cheap or rather free, and very long-term loans to European (or German) banks. Even retail sales, whose growth rates accelerated from 2.2% to 2.8%, only temporarily raised the mood for all sorts of investors. However, the content of the report of the United States Department of Labor, which was for investors as a heart balm, made the greatest impression on everyone. Not only that, 196 thousand new jobs were created outside of agriculture versus 33 thousand in the previous month. Therefore, the average working week increased from 34.4 hours to 34.5 hours and the growth rate of average hourly wages slowed from 3.4% to 3.2%. That is, everything is the same as those investors like - people work more and they pay less for it.
Naturally, the most important event will be the summit of the European Union, which will be held on April 10. During this gathering of the club, the fate of Great Britain will be decided, and this day will go down in history for a long time. Obviously, Theresa May and Jeremy Corbin obviously did not have time to decide something by this date considering the trepidation and tenderness with which they coordinated the plan (PLAN) of the negotiations on the discussion of Brexit options. Perhaps, only make a calendar of meetings for the month ahead. Europeans themselves are obviously not so vegetarian and the same Jean-Claude Juncker repeatedly voiced them. It's not just that Brussels has managed to adopt as many as several hundred regulations since 2017 that are designed to minimize the consequences for Europe of the "hard" Brexit. In short, sheer pleasure but not Brexit. It is not from scratch over the past few weeks from the lips of numerous European politicians of all stripes, there were words about the "hard" Brexit in combination with words about the possible benefits for European business. Most likely, there will be no new delay and frankly, it will be a shock for many. They are so eager to believe in friendship and eternal values. Excluding the fact that Europe suddenly remembers about humanism, which she herself invented, definitely not worth it. Hence, the situation is completely unpredictable. But all the same, the Europeans will most likely recall to the United Kingdom all past grievances and make a good leg swing considering all the fact that various politicians have spoken lately.
But do not think that everything is limited only by the gathering of "friends of Great Britain". After all, as has been repeatedly noted, the reaction of markets to loud attempts by politicians of all stripes in a strange way clearly corresponds to the logic of macroeconomic statistics. Data on inflation will be published in the United States, which should show its growth from 1.5% to 1.8% and almost synchronously with these data, the text of the minutes of the meeting of the Federal Commission on Open Market Operations is published. The growth of inflation and at least some specification of the plans of the Federal Reserve System will be an excellent reason for the massive purchases of the dollar. Moreover, if the European Union refuses to give the United Kingdom another postponement, then generally it will be a question of wholesale purchases.
In Europe, there will be a meeting of the Board of the European Central Bank, after which Mario Draghi will speak in a conversational genre. To the main banker of all Europe there is one extremely unpleasant question - how long does the ECB intend to refinance European banks for free? This will most likely continue until Mario Draghi heads the European Central Bank but he will not be able to say this directly, so he will try to give an extremely evasive and unintelligible answer again. Yet, investors are extremely disliked when they do not understand anything and it seems to them that they are being held for fools. They usually express their indignation through massive sales. Therefore, the single European currency will have to decline to 1.1150.
About the British statistics, it is better to keep quiet for now, otherwise, you can run into rudeness. What other statistics when the heads of the European Union decide the fate of the entire United Kingdom? If we proceed from the most likely scenario, which implies that the United Kingdom is leaving the European dormitory with things on April 12, then the pound will move with a confident pace in the direction of 1.2850. Of course, if luck is on the side of Theresa May and the Europeans will give another delay, the pound will grow and grow. Here, even the guidelines should not be set.
The material has been provided by InstaForex Company - www.instaforex.com