30.08.201909:46 Forex Analysis & Reviews: British humor (A review of EUR/USD and GBP/USD on 08/30/2019)

The fun continues, and more than one and a half million signatures for a petition against this decision have now been added to mass protests on the streets of cities in the United Kingdom, on the occasion of the postponement of the start of parliament's work. The ironic situation is that according to the law, if a petition gains over one hundred thousand signatures, then it should be considered by the parliament, whose work will begin only in mid-October, precisely because of the suspension of its work. That is, a petition in protest against the suspension of parliament should be considered by parliament, whose work has been suspended. As they say - do not try to look for logic in this. Apparently, this is such a subtle British humor. In any case, the situation has not fundamentally changed since Wednesday, and no party to the political conflict has yet taken any new steps. Therefore, the pound froze in anticipation of what will happen next. But what exactly will happen is completely incomprehensible. Obviously, the opposition in the person of Jeremy Corbyn will not leave it like that.

However, the single European currency, which relied on weak American statistics, was clearly out of luck. On the one hand, the total number of applications for unemployment benefits in the United States increased by 26 thousand. In particular, as predicted, the number of initial applications for unemployment benefits increased by 4 thousand, but the number of repeated applications for unemployment benefits increased not by 4 thousand, but by 22 thousand. Despite this, the attention of market participants was riveted to completely different data, so they did not look at the data on applications for unemployment benefits. Everyone was interested in the second estimate of the United States GDP for the second quarter, which was supposed to show a slightly greater slowdown in economic growth than the first. In this case, one could shout with renewed vigor about the impending recession and demand from the Federal Reserve System that the refinancing rate be reduced as soon as possible in order to avoid a recession in the economy. However, the second assessment, like the first, showed that the pace of economic growth slowed down from 2.7% to 2.3%. But the first assessment came out before the Federal Committee on Open Market Operations reduced the refinancing rate from 2.50% to 2.25%. That is, the Federal Reserve has already taken into account the fact of a slowdown in economic growth. In other words, there are simply no new arguments in the pressure on the Federal Reserve. So disappointed investors, who are counting on easing the monetary policy of the Federal Reserve, sadly continued to buy portraits of the dead American presidents.

Today, all investors' attention will switch to Europe, where data on unemployment rates are published, as well as a preliminary estimate of inflation. Unemployment itself may remain unchanged at 7.5%. However, everyone is worried about preliminary inflation data, which until recently could have become a reason for at least a temporary correction, since inflation was expected to increase from 1.0% to 1.1%. And if inflation showed an upward trend, the European Central Bank would have fewer reasons to look for ways to mitigate monetary policy. Nevertheless, yesterday's data on inflation in Germany, showing its deceleration from 1.7% to 1.4%, forced to revise forecasts already for the entire euro area. At the moment, they expect that inflation in Europe will remain unchanged, but given how much it slowed down in the largest economy of the euro area, we can expect much more sad results. In other words, the risks for the single European currency only increase.

Inflation dynamics in Europe:

In any case, even if inflation in Europe remains unchanged, essentially nothing will change. So, the dollar will continue its sluggish strengthening. Thus, at best, a single European currency will stand still. However, the general direction of moving down is not going anywhere; and thus, the single European currency will continue its dull journey to 1.1000.

The pound, in turn, is in the hands of Boris Johnson and Jeremy Corbyn, who grappled due to Brexit. Therefore, no one cares about macroeconomic statistics. It all depends on the actions of individual British politicians which this means that anything can happen. However, any response from the Labor Party, at least temporarily, will only increase uncertainty, which will negatively affect the pound. Although it is highly likely that political steps and statements will be postponed until the weekend, and today, the pound will quietly stand still waiting for any instructions from politicians.