Dollar, pound, and euro react to compromises differently
The things that are happening at Forex at the end of autumn show the difference between expectations and reality. The presidents of the USA and China haven’t agreed on anything yet but the yuan is feeling good. London and Brussels, on the contrary, have come to an agreement after long months of negotiations but the pound is still sick. It sometimes seems, silence is the best way. The euro seems to agree. The EU gave Italy a 3-weeks term for planning a new budget. Rome hasn’t raised a finger, Brussels keeps silent, EUR/USD is rising. Everything in the garden is rosy, right?
China has two problems. Quantity and quality. The more the USA attempts to strangle China with import duties, the faster the negative balance of US foreign trade grows. Trump threw a net into the Chinese sea three times, to no avail. The US companies are following the principle “what if it becomes worse” and are buying Chinese products more actively than before. Why not: customers are in a rage while the US economy shows the best 6-month performance over the last decade. According to the materials of the American and Chinese press, we can conclude the one you are the most at loggerheads with is the one you resemble the most. The both sides look like aggressors that violate the principle of free trade.
As for Great Britain, it’s on the edge of chaos. Theresa May finally managed to prevail upon the EU after the long months of negotiations, but then it turned out she got into a cage with local predators. Ministers resign on a massive scale, pleading that the Prime Minister has been led by Brussels, a riot has been maturing in the Parliament and the members of her own conservative party are ready to file a no-confidence motion against the Head of the Cabinet. In other words, to tear off the fragile woman’s head.
- Doctor, a shark bit off my arm!
- Yeah, they can do it.
While England is choosing between ordered Brexit, snap elections, and a new referendum on EU membership, the pound is going hot and cold. The British currency absolutely forgot about macroeconomic statistics and has been reacting only to rumours in the press. But we all know that the press would rather be the first to tell a lie than the second to tell the truth.
If the pound’s blowing hot and cold makes us clutch our heads, the euro’s consolidation amidst sharpening political risks - shrug our shoulders. Brussels’ silence in response to the absence of a B plan reminds talking to oneself. “When I’m lying, I look thinner. So, I should lie more”. It’s clear that the EU is too busy. It has to watch Great Britain and to beat off the attacks of Trump and those companies that threaten to raise import duties on European cars. Perhaps, Brussels doesn’t understand how Italy dared oppose it. Are they drunk?
So, how can a rational investor survive in such dark waters? Those who are accustomed to analysing macroeconomic statistics, forecasting central banks’ actions and basing their trading strategies on those data? It’s time to leave their comfort zone! Only then they will reach progress.
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