The Fed, the Banks of Japan and England

29 июл. 2019 г.

At the last meeting, the Governing Council of the European Central Bank (ECB) decided that the interest rate remain unchanged. Also, Mario Draghi said that officials had not discussed the rate cut. Accordingly, the euro has a good chance this week to rebound from the medium-term range lowest level. In this regard, our position on the euro - we buy primarily against the dollar.

Boris Johnson Became U.K. Prime Minister, Replacing Theresa May. Markets are frankly afraid of Johnson because of his aggressive position on Brexit. As a result, the pound is under strong downward pressure. But again, it is so far underwater right now given that there are no real reasons for this - market expectations are based on fears and rumours, not facts. We believe that common sense will eventually win and bet on the pound growth. Therefore, we recommend its purchase.

The data on the US GDP for the second quarter will be published today. GDP probably expanded 1.8% in the second quarter, down from 3.1%. If the growth is 2.2-2.5%, then the dollar, perhaps, is not in danger until Wednesday. But if 1.8%, it cannot avoid sales.

This will be the main event not only of the week but of the summer. Wednesday may well lay the foundation for a dollar downtrend in upcoming months or even years.

We are still waiting for the Central Banks of Japan and England meetings, as well as the Eurozone GDP outcome and the US labor market data to come out. In general, it will not be boring.

Our trading recommendations for the week are as follows. We will continue to look for opportunities for selling the dollar across the entire spectrum of the foreign exchange market, buying the pound against the dollar as well as against the euro, selling oil and the Russian ruble, and also buying the Japanese yen against the dollar.

As for gold, in the oversold we buy and in the overbought area we sell gold.