05.04.201912:39 Forex Analysis & Reviews: Review of the foreign exchange market on 04/05/2019

It seems that the bidders began to understand the words of Jean-Claude Juncker that there would be no further delay and the UK should have decided by April 12 on how it will be evicted from the European "hostel". Also, many began to understand what the reservation means that Europe is ready for a "hard" Brexit. Many recalled that Europe has managed to adopt several dozen legislative acts designed to minimize negative consequences should the United Kingdom to leave the European Union without an agreement. However, the UK itself did nothing of the kind and only engaged in endless chatter about the feasibility of Brexit and the like. Many in London are still talking about the second referendum. In other words, "hard" Brexit is becoming more and more real every day and clearly, London is not yet ready for it. At the same time, there is no clarity of what to do, since in London they only continue to talk and it is not surprising that the pound went down as the whole situation was realized.

Yet, the single European currency looked much better, although data on applications for unemployment benefits in the United States were much better than predicted. Their total number decreased not by 1 thousand, but by 48 thousand. At the same time, the number of initial applications decreased by 10 thousand, which should have increased by 4 thousand. The number of repeated applications decreased to 38 thousand instead of decreasing by 5 thousand. Apparently, such good data, especially on the eve of today's publication of the report of the United States Department of Labor, forced many to adjust their plans and take into account the high probability that actual labor market data will differ from the forecast data. And significantly. This is a kind of uncertainty, and in such conditions, nobody wants to risk. At the same time, the minutes of the meeting of the European Central Bank published yesterday left everyone indifferent, as it was no different from the statements that Mario Draghi had already made. So, nobody saw anything new there. Only another confirmation of the fact that the European Central Bank, in fact, resumes the program of quantitative easing.

Therefore today, all attention will only be on the content of the report of the United States Department of Labor, especially since no more interesting data comes out. It is clear that yesterday's data on applications for benefits somewhat correct the expectations on the content of the report but they correct them for the better. Moreover, the forecasts themselves are moderately optimistic. Indicators such as the unemployment rate and the growth rate of the average hourly wage should remain unchanged. However, the average working week may increase from 34.4 hours to 34.5 hours. That is, Americans are beginning to work more and therefore earn more. Consequently, it is worth waiting for the growth of retail sales and other consumer spending and with them the growth of company profits. Moreover, 180 thousand new jobs must be created outside agriculture compared with 20 thousand in the previous month, which looks wonderful altogether. In the whole report, there can be only one alarming moment. We are talking about the share of labor in the total population, which can be reduced from 63.2% to 62.9%. However, no one will pay attention to this against the background of the growing number of new jobs.

Thus, even if the content of the report coincides with forecasts, it is worth waiting for the decline of the single European currency to 1.1200. It is quite possible to decrease to 1.1175 if the data turns out to be better than forecast.

The pound should go down to 1.3050 and there is a chance that it will drop to 1.3025 if the content of the report of the United States Department of Labor turns out to be better than expected.