The British pound continued to fall very quickly after yesterday's statements of the new British Prime Minister Boris Johnson on Brexit and exit from the EU without an agreement. Johnson during the interview tightened his rhetoric compared to statements that were made immediately after his victory, and promised that the UK will prepare to withdraw from the EU without an agreement. During his visit to Scotland on Monday, Johnson noted that a new agreement can only be reached if the EU cooperates. Earlier, the Prime Minister drew attention to the fact that he would work with the EU to achieve the best agreement.
However, it is already clear that no one is going to delay the decision to withdraw, with or without the agreement, as Johnson stressed that he is ready to withdraw the country from the EU on October 31 with or without the agreement.
At the end of last week, some members of the cabinet noted that the active development of the plan for Brexit without an agreement is underway, which led to the first active sales of the British pound against the US dollar, which only increased at the beginning of this week. A special committee of senior ministers has already been set up to judge the government's readiness to withdraw from the EU without an agreement. The first meeting will be held early next week.
Another factor that puts pressure on the pound is the growing expectations of early elections to the UK Parliament, which could lead to an even greater reduction in GBPUSD in the near future. The majority of the Conservative Party will allow Johnson without problems to achieve a final decision on Brexit, with or without an agreement. This position, of course, will create an additional "headache" for the EU representatives, who are still using the internal political struggle in the UK and do not make any concessions. Let me remind you that in the middle of this month, even before the victory of Boris Johnson, EU representatives made proposals to make concessions and find a compromise on the North Irish border and trade relations. However, it never came to concrete actions or proposals.
Yesterday's data on the UK economy, considering how "snowballing" events are developing with Brexit, naturally, were ignored.
Data on credit growth in the UK will provide good support to the economy in the future. According to the report, net consumer lending in the UK in June this year amounted to 4.8 billion pounds against 3.8 billion pounds in May. Mortgage lending in the UK rose to 3.7 billion pounds against 2.9 billion pounds in May, and the number of approved mortgage loans in the UK in June was 66,440 against 65,650 in May. There was also an increase in unsecured consumer lending in the UK, which in June reached the level of 1.0 billion pounds against 0.9 billion pounds in May.
As for the current technical picture of the GBPUSD pair, it is too early to talk about any serious corrective prospects. Despite the fact that the pound has lost since the beginning of the week more than 2.7%, bears will wait for the unfavorable development of the situation with Brexit and use it until the last moment. It is possible to consider new short positions in the continuation of the current bearish trend after the correction to the area of large resistance of 1.2220 and 1.2270. The main goal of the sellers will be to re-test the low of the year in the area of 1.2115, which will lead to a further gradual decrease in the trading instrument already in the area of the lows of 2017. However, it is necessary to overcome the support in the areas of 1.2040 and 1.1985.
EURUSD
The European currency continues to trade in a narrow side channel paired with the US dollar. Given the lack of important macroeconomic statistics, traders closely followed any news. Once again, the US President did not miss the opportunity to criticize the work of the Federal Reserve System. During his speech, Trump said that the Fed has made all possible wrong steps, and a small rate cut will not be enough. Trump is also annoyed by the fact that the Fed is doing very little in terms of interest rates, compared to China and the EU.
Data on production activity in the area of responsibility of the Federal Reserve Bank of Dallas were ignored. According to the report of the Fed-Dallas, the production index in July this year rose to 9.3 points against 8.9 points in June. The index of new orders rose to 5.5 points, and the index of business activity rose to -6.3 points, but still remained in the negative territory.
