The beginning of the new week was marked by the fall of the British currency. By evening, the quotes fell to their lowest marks in the last 2 years. News of the Brexit come out one after another, all of which are negative. Judging by reports in the press, the UK is just waiting for a scandalous exit from the European Union. Hastened to notify Boris Johnson. In addition, British Foreign Secretary Dominic Raab said that his department is actively preparing for a "hard" Brexit.
The pound remains hostage to the game played by the EU and Britain.
In the near future, the pressure on it will not only continue but will also increase. There is almost no time left for a civilized "divorce". Given the harsh rhetoric of politicians, hopes for a new deal are melting away, and hard Brexit or early elections are becoming more realistic.
What is Johnson's role?
Many are now wondering: why did Boris Johnson become the leader of the Conservative Party and get the post of British prime minister? Where will this Englishman take the country with his unkempt hairdo and what will happen next? It would be naive to believe that a country accustomed to accusing and judging, ordering and domination, dividing people into masters and servants will put the naive and stupid simpleton at the head of an important post.
The image of Boris Johnson was chosen by chance, this is the opinion of most analysts. It works well in negotiations. The opponent gains confidence in the atypical Briton, he says, and sometimes he does more of his position. However, the work of Boris Johnson was seen by many at the post of British foreign office. It seems that an uncompromising man has come to the post of prime minister. It is not to be underestimated. No matter how he looks or what he says, it is important what he does. If Theresa May somehow considered Brexit's decision, having agreed with the EU, then in this case it's probably worth forgetting about the deal. It is possible that May's role was only distracting and time-consuming.
From an economic point of view, the UK is losing little even with hard Brexit. It has a trump card - a powerful partnership and a capacious market with a longtime ally of the United States, which, by the way, is hampered by Chinese exports. Having united with the British, it will be easier for the United States to solve the problem with China, with which England once fought with opium methods.
As for Europe, Germany, as well as other countries, will lose the sales market, since in the event of a hard Brexit, Britain will no less aggressively defend its interests. It should also take into account the sanctions against Russia with the filing of the United States, from which the Europeans are uneasy. Nothing has changed, the UK still considers itself a "lady" with a capital letter.
The euro is not to be envied, most likely, its rate will fall. Is it good or bad? Watching which side to watch. Given the imminent currency wars, the purpose of which is to weaken the currency, it is to the benefit. The ECB is seriously considering a reduction in rates and the launch of a printing press in order to later put pressure on the euro and support its exporter. The other side is customs duties. In the medium term, the euro against the pound may strengthen to 0.9550, and after a year - be at around 0.7320.
Paired with the dollar, the next stop for the euro can be the level of 1.10.
Traders agree that the euro now has only one road - down. This is due to the local strengthening of the dollar and the prospects for reducing the ECB rate. The political background is also against the euro. Trade tensions between the United States and Europe intensified after the French president signed the "digital tax" law on US technology companies. Donald Trump threatened to introduce duties on French wines and other European products. "Short" positions on EUR/USD, apparently, remain in priority.
The material has been provided by InstaForex Company - www.instaforex.com