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28.06.2016 12:26

European session review: the pound gradually recovering after the massive fall

The euro rose against the dollar significantly, fully recovering after yesterday's decline. Investors continue to analyze the impact of the unexpected results of Brexit for the global economy and the political situation in Europe. However, restoration of confidence is seen after the initial reaction of panic and the markets realized that the consequences of Brexit may not be as bad as many had feared at first.

Meanwhile, the US dollar depreciates, as market participants price in a lower chance fo the increase in Fed's intrest rate for the foreseeable future. Currently, futures on the Fed rate indicates 18 percent chance of rate cuts at the September and November meetings. Prior to the British referendum there were zero chances of lowering rates and 52% chance of a rate hike at the September meeting.

Market participants are also waiting for news from the summit of EU leaders, during which will be discussed Britain's decision to leave the EU structure.

Little impact on price action from the economic data The Statistical Office Destatis reported that import prices in Germany fell again at the end of May, slowing the pace compared to the previous month. In addition, last fall proved slower than experts expected. According to the data, the import price index fell in May by 5.5 percent year on year, compared with a decline of 6.6 percent in April, which proved to be the biggest since October 2009. Economists expect that the prices will decrease by 5.8 percent. Excluding energy, import prices decreased by 2.7 percent. On a monthly basis, import prices rose in May by 0.9 percent, offsetting a decline of 0.1 percent in April. Analysts predicted that the prices will increase by 0.6 percent.

The British pound appreciated by about 1.2% against the US dollar, approaching $ 1.3400. Today, the UK Chancellor said that Britain will have to raise taxes and cut spending to counter the economic problems that will arise after the British voted for withdrawal from the European Union. "We have to ensure absolute safety for the people and show the country and the world that the government can work at full capacity". Osborne also said that the UK is a key to financial stability, which was broken by a vote. "We have entered into a long period of economic restructuring of the UK We will adapt to life outside the EU, and it will not be economically rosy as life within the EU." - Said Osborne.

Yesterday the rating agency S & P downgraded the credit rating of the UK from "AAA" to "AA" and stated that the vote against leaving the EU in Scotland and Northern Ireland UK aggravated constitutional problems. Another major rating agency - Fitch Ratings - also downgraded by one notch and warned about the likelihood of a sharp slowdown in economic growth due to the fact that the company will postpone investments at a later time. In addition, Fitch Ratings has revised downwards its forecast for UK economic growth for 2016 to 1.6% compared with 1.9% previously.

EUR / USD: during the European session rose to $ 1.1112

GBP / USD: during the European session rose to $ 1.3385

USD / JPY: during the European session rose to Y102.42

28.06.2016 12:00


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