Britain Election Results, Lagarde Position and Trump Tweets

13 дек. 2019 г.

Elections in the UK, ECB decision and potential approach the finish line in the first phase of negotiations between the US and China. We will take these matters up one by one.

In Britain, parliamentary elections were held. The conservatives, led by current Prime Minister Boris Johnson, confidently won. This victory quite radically changes the political alignment in Britain, but for us, it is interesting primarily for Brexit. In this case, our basic version worked out perfectly: the “soft” Brexit option will be implemented based on the current version of the agreement between the EU and the UK. Naturally, the pound pulled up amid such results. Recall that in our reviews this week we actively recommended buying it. So congratulations to those of our readers who listen to our recommendations, with excellent results.

The ECB yesterday expectedly left monetary policy parameters unchanged. And the volume of the asset buyback program (quantitative easing) remained at the level of 20 billion euros.

The new head of the Central Bank Christine Lagarde said that the slowdown in the Eurozone economy has stopped. She could have been trusted, if not for yesterday’s data on industrial production in the Eurozone, which showed a decrease of 0.5%.

As for the other her statements, it is worth noting the intention to revise the ECB's monetary policy strategy, but some details will become clear not earlier than from the beginning of the next year.

But this did not contribute to the growth of the euro today. Brexit is a problem not only in the UK but also in the Eurozone. Accordingly, its resolution is positive for the euro too.

Yesterday we could observe the sales in yen pairs and gold, that is, in safe-haven assets. This sale was based on Trump's tweet that the United States came close to a deal with China.

Today we will buy safe-haven assets: first of all, sell EURJPY and USDJPY as a less risky option, but we will also look for points for buying gold.

Recall, on December 15, the United States may increase duties on goods from China. China will naturally response. Thus, Trump's tweet creates the illusion that there will be no further escalation. If the illusion is dispelled, it will provoke a sharp increase in demand for safe-haven assets.