The lack of important fundamental statistics yesterday limited the upward potential in the euro and the British pound. At the moment, the pressure on these currencies is gradually increasing even against the background of the expected lowering of interest rates in the United States at the end of this year. This is because the problems in the eurozone economy are much greater than in the United States, and there is nowhere to lower interest rates. As for the UK, then all attention is again drawn to the Brexit deal, or rather, to its absence. Many EU representatives did not like the plan proposed last week by Boris Johnson, which only aggravated the situation before the summit, which will be the last, before the official UK release date of October 31 of this year.
Given that the risk of disorderly exit has increased significantly, an interesting report by the IFS Fiscal Research Institute was published yesterday, which indicates that an unregulated exit from the EU will cost the UK very dearly. A study by leading British economists focuses on the wrong actions of the government in this situation. It is expected that if Brexit reaches a critical point, the government will go to extreme measures to reduce taxes and higher public spending to compensate for the effects of a breakdown in trade relations. However, this will lead to an increase in public debt to the highest level in the last half-century.
The analytical center also said that government loans next year will already be more than doubled, regardless of the outcome of negotiations with Brussels. As a result of an unordered exit, the total amount of all borrowings accumulated by the British state – will be almost 90% of GDP, reaching its highest level since the mid-1960s.
As for the current technical picture of GBPUSD, it remained unchanged. The bulls are doing their best to maintain the level of 1.2270-80, the breakdown of which will hit the stop orders and will lead to a larger downward trend. On the other hand, an unsuccessful breakthrough of this support will return new players to the market, betting on the continued strengthening of the trading instrument. The breakdown of the resistance level of 1.2350 will open a direct path for the pound to last week's highs of 1.2410, as well as to their renewal in the area of 1.2480 and 1.2570.
EURUSD
The euro also remains in the side channel, and yesterday's data did not affect the technical picture in the pair.
The report that Americans' borrowing slowed slightly in August this year did not appeal to traders, as it points to household concerns about the slowdown in the economy, which affects spending. According to the Fed's data on consumer lending, compared to August 2018, consumer lending increased by 5.12%, and the total volume increased by 17.9 billion dollars compared to the previous month.
Economists had forecast growth of $15 billion. Revolving loans decreased by 2.16%, while non-revolving loans increased in August by 7.83%.
Yesterday's speech by the President of the Federal Reserve Bank of Minneapolis Neil Kashkari was not of interest to the market. Kashkari said he was pleased with the way the central bank is lowering rates, as it is time for the Fed to support the economy. The Fed representative did not answer the question about how much lower the rate cuts this year, only drew attention to the fact that the committee should use the rate cuts to maintain the economy, as well as to stabilize financial markets, adding that the central bank may resort to other instruments, if rates fall to zero.
During his next speech in Salt Lake City, Fed Chairman Jerome Powell was more conservative in his statements. The chairman drew attention to the independence of the central bank from political pressure. According to him, the Fed should make decisions in the interests of the economy for the long term, and not look back at the political pressure at the moment.
As for the technical picture of the EURUSD pair, it remained unchanged. Only a breakthrough of the resistance of 1.0995 will provide an influx of new buyers, which will lead risky assets to new highs in the area of 1.1030 and 1.1070. If the bears cope with the support in the area of 1.0955, then its break will provide new pressure on the trading instrument, as well as lead the pair to update the lows of 1.0930 and 1.0900.
