On Thursday, world markets were again in a state of bewilderment, more likely close to shock, and there were two reasons for this.
The first is an unexpected departure from Pyongyang where negotiations between US President Donald Trump and North Korean leader Kim Jong-un took place. According to the Trump, "sometimes you just need to leave." It seems that what he had in mind is the impossibility of an agreement on the nuclear program with North Korea without giving up his own interests.
The impulsive nature of the American leader has once again shown that he is not able to compromise. The North Koreans wanted all the sanctions lifted from their country as a result of the negotiations, however, Trump said that this was impossible. This news plunged the world markets into a near-shock state since if no agreement is reached between the United States and the DPRK, the risk of nuclear blackmail by the latter will hang over the States and cause a reason for them to be nervous.
The second reason for the growth of negative sentiment in the markets was the publication of weak US GDP data for the fourth quarter. Although some officials, such as Finance Minister Steven Mnuchin, reassured by saying that this happened only because of the long-term "shutdown" rather than weakening economic growth in the country. The markets did not believe this, which affected the negative dynamics of the US major stock indexes. In addition, the comment by the US Trade representative, Robert Lighthizer, at the talks between Washington and Beijing has reduced the likelihood of signing a new broad trade agreement in the near future and came across as negative.
It seems that such realities are indeed pointing out that not everything is so easy going on in the negotiation process, despite the optimistic statements of Trump and Mnuchin. Investors are no longer responding to this and are simply waiting for reports on the actual conclusion of an agreement and they will no longer be interested in the hype around this event and the real facts. This scenario is when you can expect really strong movements in the markets, including, of course, the currency. In the meantime, as we indicated earlier on more than one occasion, the overall lateral dynamics against the background of low volatility will prevail.
Forecast of the day:
The AUD/USD pair is trading above the level of 0.7085, still remaining in the range of 0.7060-0.7200. We consider it possible to buy the pair either during its decline from the level of 0.7060 or after its fall below the mark of 0.7085 or immediately from this level with a likely increase in price to 0.7200.
The GBP/USD pair has adjusted downward after a strong growth on the wave of a probable Brexit delay. If the price drops below 1.3240, it is likely to fall to 1.3190.
