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The dollar is in no hurry to fight. The Middle East conflict is exhausted?


Relieved. Donald Trump has decided not to start a war with Iran, and to limit the economic sanctions in response to attack US military bases in Iraq. Allegedly, the damage is insignificant, there are no victims. Each side has its own truth. Tehran has little earlier reported 80 casualties, but this does not change anything. Fear about the escalation of the conflict in the Middle East was held, and markets can return to their normal life. The focus of investor attention shifted from geopolitics to the US trade agreement and China. The good news for the euro? Do not hurry to rejoice!


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Positive forecasts for the EUR / USD are based on assumptions about the recovery of the eurozone economy and the expansion of the differential growth of the global and US GDP. War in the Middle East could make major adjustments to this theory, and I want to believe that she did not start. However, the decline in global economic forecasts for 2020-2022 by the World Bank suggests the idea that without the armed conflict, the United States and Iran, the revaluation of the euro would go with a squeak. Authoritative organization believes that the global GDP in the new year to accelerate only slightly, from 2.4% to 2.5%, while the evaluation of European indicators have been reduced, and the US, on the contrary, increased. 


World Bank forecasts


Source: Financial Times.


Theory without practice is dead. Can be arbitrarily long talk about the recovery of the European and the slowdown of the US economy, but so far it is not specific figures will prove to rally EUR / USD will remain only a dream. In this respect, strong statistics on the US and disappointing in Germany naturally led to the continuation of the correction to the medium-term uptrend on the major currency pairs. 


Employment in the US private sector increased by 202 thousand in December. Most added services (+173 thousand) and mid-sized companies, with a staff of 50 to 499 people (88 thousand). German factory orders disappointed again. Indicator decreased by 1.3% m / m in November. ING said that the average monthly orders fell by 0.6% in 2019 and 0.4% in 2018. The last time they were down for two consecutive years in 2001-2002. The assumption that the German economy bottomed, it is doubtful, which means "bulls" on EUR / USD is not much reason for the resumption of the Northern Expedition as they would like. 


The dynamics of the German manufacturing orders


Source: Bloomberg.


The next test for the euro may be a report on the US labor market in December. If employment outside the agricultural sector will grow at the same pace as the private investors finally lost faith in the myth about the slowing US economy. Trading on the divergence in GDP growth will have to be postponed indefinitely, and the risks of falling EUR / USD to a 1,106 increase. On the contrary, the report disappointing returns interest in buying the single European currency. Immediately all remember that the World Bank and in 2019 was one of the main pessimists, that while the IMF and the OECD issued a much more positive outlook on the prospects of the global economy. As a result, the "bulls" will force to return the pair to 1,115.


Do not miss: The foreign exchange market to earn 3-10% per month


Based on materials from LiteForex


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