Eurozone
Eurozone economic prospects continue to deteriorate previously concluded by the Markit group, supported by the German ZEW Institute today. The sentiment survey showed that the index of current economic conditions fell from 70.1p to 58.2p in November. The sentiment index remained almost unchanged at the minimum level for more than 6 years and in the Eurozone as a whole, the mood deteriorated from -19.4p to -22.0p.
The study showed that industrial production, retail, and foreign trade indicate a weak development of Germany in the 3rd quarter. Expectations for the next six months show no improvement and the general trend is negative. It is especially alarming against expectations of the ECB's exit from the economic stimulus program and the first in more than 20 countries. Ten years of the rate hike is expected in the summer or autumn of 2019.
Rumors in the markets persist that the ECB may start a new round of the LTRO program in the first half of 2019 and the program may start as early as January. This forced step will be aimed at supporting Italy, primarily the banking sector, in order to preserve the single currency, since any scenarios for reducing the expenditure side of the budget are rejected on the peninsula from the threshold. Italy demonstrates decisiveness, hinting at the probability of leaving the eurozone if its requirements are not taken into account.
Today, the revised budget will be sent to the European Commission as reported by Il Sole in the morning that Italy still maintains a deficit of 2.4% but it can adjust its growth target for 2019 from 1.5% to 1.2%. News on the Italian budget may contribute to a new wave of euro sales.
The EUR/USD pair continues to be under pressure Quotes have updated the 16-month low, and there is almost no reason to expect a reversal of the euro. The euro is aimed at a further decline and a withdrawal below 1.12 is likely in the next day. Worsening the dollar's expectations for the euro from a deep fall below 1.10 can save the common currency.
Great Britain
Markets reacted ambiguously to the publication of a report on the labor market in the UK in September. The unemployment rate rose from 4.0% to 4.1% and new applications for benefits created 20.2 thousand. Both indicators are worse than expected. At the same time, the average wage increased slightly higher than expected, indicating the risks of rising inflation in the short term and supports the Bank of England plans to raise the rate by a quarter percent in the first half of 2019.
In any case, the main criterion for assessing the prospects for the pound is not the economy, but politics, since the direction of movement of multi-billion capital flows depends on the solution of the issue on Brexit. It is likely that Frankfurt will be the main focus, that is, a significant part of financial institutions may move from London in order to retain the right to work in the European market, and this will be a bad scenario for the pound since it will lead to a significant drop in its value.
Theresa May tried to smooth out the negative on Monday, stating that negotiations were close to completion. She acknowledged that reaching a compromise solution is an extremely difficult task, nevertheless, the work continues and must be completed since "the people of Britain want Brexit". Even so, the chances of signing an agreement in the near future are minimal and the solution of the question is postponed, most likely until the next EU summit, which will be held on December 13 and 14.
The GBP/USD pair updated the local minimum on Monday and continues to remain under pressure. The immediate support is 1.2745 and then further moved to 1.2695. There is no reason to wait for an upward reversal until the positive news is heard from Brexit, as well as Brussels but not from London.
Oil
Brent went below $ 69 per barrel in effect of Saudi Arabia's plans to cut production by 500 thousand barrels from December. Each day was short-lived. The fall in prices occurs against the background of a strong dollar strengthening across the whole range of currencies but it is unlikely to turn out deep. OPEC + countries intend to hold the pricing process in their hands and decide on a significant reduction in production if the quotes continue to decline.
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