After the New Year rally in world markets in the wake of clear signals of a slowdown in economic growth in China, as well as the uncertainty of resolving the problem of Britain's exit from the EU, a suspicious calm settled in the markets.
The increase in volatility promised by analysts has fallen, which can be explained by a drop in the desire of investors to show any activity on the eve of very important trade talks between Washington and Beijing, which will be held on January 30-31. Despite the high optimism of the expectations of a positive outcome of this meeting, there are real risks of its failure, since the result can only be achieved under strong US pressure on the PRC, and not, as they say, by voluntary mutually beneficial agreement.
Probably still, the agreement will be reached, since the Chinese will not risk a complete confrontation with the United States due to the country's excessive dependence on trade with them. But, most likely, the "heavenly" will harbor a grudge and at any suitable moment can strike back with a "blow" to Washington.
In addition, the focus of the market remains the topic of Brexit, which has already filled the edge but still has a significant impact on world markets and primarily on the British pound and the common European currency. In addition, the euro was still under new pressure, which is that the unexpected slowdown in the economies of the EU-leading countries of Germany and France almost buried the hopes of those investors who thought that in September of this year the ECB would begin the process of raising interest rates, which was the reason for the noticeable drop in the euro in the currency markets at the beginning of the year.
In our opinion, until the end of this month, a delicate balance has been established on the market. The US dollar cannot strengthen against major currencies due to the high probability that the Fed will pause in raising interest rates. At the same time, sterling remains hostage to the problem of Britain's exit from the EU. Euro currency does not receive support due to falling expectations that the ECB will begin the normalization of monetary policy this year. Commodity currencies remain hostage to a high probability of slowing down the growth of the world economy, which will reduce the demand for commodity and commodity assets. The Japanese yen is also actually frozen in place due to multidirectional reasons affecting its dynamics, the demand for defensive assets and the expectation of recession in Japan.
Summing up, we note that this state of affairs should be maintained until the end of the month, when one of the most important factors of uncertainty, trade relations between the States and China, will be resolved, which can serve as an incentive for increased investor activity.
Forecast of the day:
The currency pair EUR / USD is consolidating, remaining in the range. It can continue its gradual decline to 1.1300 if it overcomes the level of 1.1350.
The currency pair AUD / USD is trading below the level of 0.7150 in the wake of increasing concerns over the growth prospects of the world economy. If the pair holds below this mark, there is a probability of its decline to 0.7085.
