The fourth week already shutting down the work of the US government threatens to accelerate the arrival of the recession, as more and more workers not only in the public sector but also in a number of other sectors connected by contracts, do not receive wages, and the contracts are not executed or are not fully implemented. The White House administration expects GDP growth to decline by 0.1% per week.
These calculations may turn out to be too optimistic since the shutdown occurs during the transition of the US economy to recession. The latest data show that a number of important macroeconomic indicators have a negative trend, in particular, producer prices declined in December in both sectors.
The index of industrial activity in the business sector of the New York Federal Reserve Bank plummeted from 10.90p to 3.90p, which was significantly below the forecast, the index of economic optimism from the NFIB at a 13-month low.
Yesterday, the head of the Kansas Fed, Esther George, said that "no one has a complete understanding" of how the Fed's bland policy affects the economy and that stopping the rate hike would be a good idea. Until recently, George was considered a confident hawk, a change in sentiment in the Fed is already visible to the naked eye, and markets create confidence that there will be no more rate increases until the summer.
Eurozone
ECB President Mario Draghi, speaking in Strasbourg, said that the pace of weakening of the eurozone economy is stronger than expected and that it still needs large-scale support from the ECB. According to him, incentives are needed to support inflation, so reinvestment of the funds released will be continued; this statement should be considered clearly pigeon a week before the ECB's meeting on January 24.
The euro fell on Tuesday against the Brexit vote, but there is no strong pressure on it due to the growing uncertainty with the dollar. Today, important macroeconomic data is not expected, a report on inflation will be released on Thursday, which will give new benchmarks, while on Wednesday, EUR / USD will try to play some of yesterday's losses, a slight increase is likely to be up to the resistance of 1.1451, support of 1.1381 is likely to stand.
Great Britain
432 votes to 202, the House of Commons of the British Parliament rejected the May Exit Bill proposed by the May Government. The scenario, which was prepared by the parties for many months, was deemed unsuitable, and the gap of 230 votes sharply increased the likelihood that Theresa May would resign in the coming days.
May has one last chance. If the government gives her support, she will be able to present the updated exit plan to Parliament by January 21, while there will be an opportunity to demand from the EU the extension of Art. 50 for a period of two to four weeks and initiate another round of negotiations. Brussels has repeatedly stated earlier that it will not agree to the revision of the agreement and considers the current version as final.
Despite the fact that a significant part of the Conservatives opposed the agreement, the likelihood of new elections is small, since the growing popularity of Laborists will lead to the fact that some conservatives lose their seats in parliament in the new election, which is clearly not in their plans.
The pound reacted to the voting results with a fall, but then again recovered to the levels of the beginning of the week, because the failure of the vote did not, in fact, lead to clarity and did not change the main political alignment. Until January 21, volatility will remain high, but a deep failure is unlikely.
Today, the Bank of England's CEO Mark Carney is expected to speak, as well as the publication of a data package on producer prices and consumer inflation in December. A slight slowdown in price growth is expected, which is already included in the quotes; the stability of the pound indicates an unrealized bullish potential. GBP / USD today will try to test the strength of 1.2929, pronounced growth is unlikely.
The material has been provided by InstaForex Company - www.instaforex.com