EUR / USD, GBP / USD
Until the last moment on Friday, the markets hoped for a deal in the US Congress to extend the interim financing of the budget. The single European currency and the British pound. At the same time, the euro area's balance of payments rose from 30.3 billion euros to 32.5 billion in November, with the expectation of growth to 31.3 billion. While the UK retail sales in December decreased by 1.5% while expecting for -0.8%. In the US, the preliminary assessment for consumer confidence index in January from the University of Michigan fell from 95.9 to 94.4 points.
However, the deal in the Congress did not take place. The White House and the Republicans were on the immigration policy of the Democrats, and the US government remained without funding during the entire weekend. During this time, the parties tried to accomplish any consensus, so that the situation would be normalized on Monday, but not for the meeting. So, today is the third day for the partial "cut-off" of the budget from financing, which could lead to government "shutdown".
The last time the government disconnected from the money was in October 2013, then the "shutdown" did not make a positive impact on the markets, except for the increase of the euro by 100 points during the first two days and followed by a 130 points decline. Economic losses for 16 days of the government at that time are estimated at $ 24 billion which include sectors that are not considered vital. Today, the markets have also reacted calmly to the cut-down of the budget. Majority of the politicians expressed the idea that the agreement will be reached faster than 16 days. The opening of markets occurred within the framework of normal volatility.
On Sunday, a vote was taken in the Social Democratic Party of Germany with an agreement regarding government coalition. As expected, the agreement was accepted. Negotiations continue and encourage European "bulls". Today, the Eurogroup which includes finance ministers from the euro area countries will sit tomorrow in the Ecofin summit. It is a meeting of finance ministers and ministers of economy of the euro area countries. On Tuesday, the growth of ZEW indices in the euro area for January (29.7 vs. 29.0) is expected, according to the US statistical data that may not be published because of the "shutdown".
We are looking forward to the growth of the euro to 1.2365, and the rise of the pound sterling to the range of 1.3980-1.4000.
USD / JPY
Just like the rest of the markets, the Japanese yen calmly took notice of the next US "budgetary failure". Because of the January's business confidence index released this morning (Reuters Tankan)that showed an increase from 27 to 35, the yen completely played a 20-point gap on the opening and currently stopped in thought. The Japanese stock index Nikkei 225 is down to 0.19%, probably due to a slight decline in futures for US indices (S & P500 -0.10%). Other indices of the APR countries show growth, China A50 at 0.54%, IDX Composite at 0.29%, and S & P / ASX 200 at 0.04%.
The announcement by the Bank of Japan regarding changes in the monetary policy will be held tomorrow. It is expected that there will be a further announcement about the plan to reduce the volume of asset purchase, that is, verbal tightening. But in the past two weeks, the market situation for the yen has sharply deteriorated, and the Bank of Japan may be affected by the softening of the speech. On Wednesday, the mixed data on trade balance are expected, which are already known by the CB Board member. In this regard, we consider two scenarios, first is the major expected decline of the Japanese currency to the levels of 109.90, 109.60, 109.30, or, the possibility that the price may rise to 111.70.
* The presented market analysis is informative and does not constitute a guide to the transaction.
