In the absence of an agreement on Brexit, the role of the Bank of England in the UK economy will be secondary. Publication of European Commission decision on the issue of intaglio may derail the euro.
As for fundamental statistics, there is no important data to come out in the first half of this week.
It is necessary to pay attention only at that time that the number of bookmarks for new homes in the USA increased slightly in October. It happened due to the intensification of the construction of apartment buildings. Despite this, the weakness of the construction sector persists due to a sharp decline in demand.
According to the US Department of Commerce, it was up to 1.5% of the number of units per year. Economists had expected to grow by 2.4% in October. The number of permits for housing construction fell by 0.6% compared with the previous year, while economists had expected an increase of 2.3%.
As for the technical picture of the EUR/USD pair, the downward correction may continue today, and the unsuccessful fixing above the resistance of 1.1400 will provoke a return to the market of new euro sellers with the updating of this week's lows around 1.1330 and 1.1290. If euro buyers manage to quickly return to the market after yesterday's collapse, a break of 1.1400 will lead to a new wave of growth of the euro pair to the maximum of a week in the area of 1.1470. However, in such a scenario, it will be difficult to expect a large upward trend as the formation of which requires a more serious downward correction.
The British pound fell yesterday amid statements by the representative of the Bank of England. The statements were related to problems that may arise under the scenario if the Brexit agreement is not approved by the parliament.
Bank of England spokesman, Michael Saunders, noted that most UK companies are not prepared for the fact that the country's exit from the EU will take place without an agreement on further trade relations. According to him, companies do not know how to prepare for such a development of events, which will seriously affect the rate of economic growth in the future. The main problem remains a decline in the confidence of companies, as well as a serious increase in uncertainty in the future.
The sharp decline in investment by UK companies will continue gradually from the 2nd quarter of 2016, which will affect the development of the economy.
The pound also reacted negatively to the statements made by Mark Carney, manager of the Bank of England. In the course of his speech, Carney was concerned about the fact that in the event of a UK withdrawal from the EU without an agreement on further relations, the role of the Central Bank would be secondary. This suggests that the regulation of monetary policy by the Bank of England, namely raising or lowering interest rates, will not be so important for the economy. According to Carney, such a scenario will lead to an economic shock.
As for the technical picture of GBP/USD pair, a breakthrough of the support level of 1.2760 may hit the stop orders of the pound buyers, which will provoke a new wave of decline in the trading instrument with the October lows reaching the levels of 1.2660 and 1.2620. To return the initiative to the side of buyers, it is necessary to fix above resistance 1.2820, which will return the trading instrument to the highs of this week in the area of 1.2880.
The material has been provided by InstaForex Company - www.instaforex.com