Tuesday’s calendar would look rather quiet, if not planned for 12:45 (GMT+1) occurrence of the British Prime Minister. Theresa May during her speech will talk about shape of future negotiations and action on exit UK from EU structures. Markets are worried that this will affect negatively pound sterling.
What’s interesting in macro calendar? – Night data and Tuesday’s macroeconomics.
Before we go to the forecasts in connection with the occurrence of T. May, let’s take a look at Tuesday macro-economic calendar . In the night we met, inter alia, information on housing loans in Australia and the Japanese industrial production for November. They had, however, no greater impact on the market, so we can pass them by indifferently.
Of the indicators yet to be published, the most important may be the ones from 10:30 – that’s when we will know the results for December consumer inflation in the UK, which analysts say will be among the best in recent months. Then waiting for us publication of the ZEW index (Economic Sentiment published by the Zentrum für Europäische Wirtschaftsforschung measures the institutional investor sentiment, reflecting the difference between the share of investors that are optimistic and the share of analysts that are pessimistic. A positive number means that the share of optimists outweighs the share of pessimists. usually, an optimistic view is considered as positive (or bullish) for the EUR, whereas a pessimistic view is considered as negative (or bearish)), and shortly after on the podium will be Theresa May:
Terrible year for GBP – and this is just the beginning …
According to the latest reports from Bloomberg, Theresa May during her Tuesday speech will strongly favor desire to resolve the long-term relationship with the EU and will reject proposals for partial exit, in order to fully cut the umbilical cord linking continental Europe with the Islands.
At the same time The Telegraph publishes on its pages supposed content of the speech of Mrs. Prime Minister, in which she will focus on twelve key points. Four of them relate directly to Brexit and will speak about the “honesty and confidence,” “stronger UK”, “fairer UK” and “fully global UK”. At this point it does not tell us too much and most likely text in British newspaper will not fully coincide with the final statement of T. May.
Focusing on facts we can point out some of the key theses which markets want to hear:
- Theresa May will provide the strongest speech on Brexit that took place so far
- Investors want to hear an explanation how the government approaches the process of exit from the EU and in what time frame it will be made
- UK bound for full or only partial exit
- How for the alleged decisions of the UK will respond Brussels
- How much can weaken the pound after speech of the Prime Minister
Beginning of the year for the pound sterling is certainly not the most promising. Quotations of GBP/USD landed below 1.20 for the first time since the October Flash Crash and the new week began with a bearish gap in range of 150 pips. If only concerns about approaching speech of Theresa May provoked such a strong movement, what will happen during the speech? One thing is certain – GBP recently became politically driven currency discounting the forecast of future of UK on the map of Europe:
No better situation is on the GBP/AUD. In January alone pair lost over 1,000 pips. It is true that to lows of October still lacks a lot, but there are indications that it is going in that direction. In shorter terms we will see the bearish gap similar to that one on cable. Here bulls hadn’t enough force even for a momentary test its closure. On Tuesday, as for now daily pivot provides support area at 1.60990 – the volatility during T. May speech can push price far lower, even in the vicinity of S1 and lows from Monday 1.60180:
Market Overview -Will British Prime Minister Shake The Pound?