News background on 09/11/2018

The main attention on Monday was riveted to the pound. And if in the first half of the day the reason for this was the publication of quite good statistics on UK GDP (+ 0.3% m / m + 0.6% q / q forecast: + 0.1% m / m + 0.5% q / q June: + 0.1% m / m + 0.4% q / q), then after lunch the pair's growth driver became the news from the Brexit fields. We have already noticed that in the autumn volatility in pound pairs will be increased and sharp changes in the exchange rate of the British currency are more than probable. Yesterday, the reason for its growth was the comments of the main negotiator from the EU, Michael Barnier, that the deal could well be concluded in the next 8 weeks. Recall, in our opinion, the current price of the pound is the result of discounting the markets under the "no deal" option. And if the deal will be concluded, the pound paired with the dollar has a very real chance of growth above the mark of 1.40-1.41. In the figure above, we highlighted the moments of the pound's reaction in the first case to the news that Germany is ready to make concessions and in the second - the reaction to Barnier's comments. The ice has been broken, and everything is heading towards a logical outcome. And the pound is still very cheap, that is an excellent opportunity for its purchases.

Recall also that while in the negotiations on NAFTA between the US and Canada a lull, and the Canadian dollar is still very cheap against the dollar, there are chances of selling a pair of USDCAD from a good point. The justification, in fact, is the same as with the pound: markets incorrectly estimate the probability of a deal, as a result, the Canadian dollar is worth less than it should.

The Russian ruble is plunging deeper into autumn depression. Even those analysts who considered the Russian currency to be undervalued started to "bury" it. For example analysts of Raiffeisen bank predict the ruble to reach the mark of 77 rubles per dollar. Moreover, the forthcoming meeting of the Bank of Russia (September 14) exerts additional pressure on the ruble, at which it is possible that the rate may rise, which, after a few downsides, will be a shock.
On the fronts of trade wars without change. That is, everything is still bad and tends to deteriorate. Trump said he was ready to introduce tariffs for an additional 267 billion US dollars of Chinese imports, in addition to the already planned $ 200 billion. China replied that it would impose its duties. In this light, the currencies of emerging countries and their markets are under attack. So, despite the cheapness, we would not recommend buying neither the Chinese yuan, nor the Indian rupee, nor the Brazilian real, etc.

The key events of this week will be ECB and BOE meetings on Thursday. Markets do not expect any surprises, but the stronger may be the reaction in case of unexpected statements / decisions of the Central Banks.