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EUR/USD pulled back to 1.1390 level

Jan 16 2019, 01:49 AM (CST) | Fortfs.com

On Tuesday, European currency showed a significant drawdown against the dollar, as Euro lost in price more than 0.6%. It is interesting enough that this time the movement in the pair EUR / USD occurred not due to the influence of the dollar, but due Euro weakness. Here we can highlight two main factors of pressure on the European currency: 1) Brexit vote in the British Parliament, ahead of which the British pound showed a strong decline, which did influence European currency 2) publication of data on a slowdown in the growth of the German economy.

Late yesterday evening, the British parliament voted against the Brexit agreement proposed by the government. Now the government should provide a further plan of its actions within three days, but it is likely that Theresa May might have no time to do this, since the apposition today intends to vote on the issue of no confidence vote in the prime minister. The uncertainty associated with Brexit is a serious risk factor for the EU, so the European currency remains under pressure, despite the local speculative growth of the British currency.

Perhaps even more pressure on the European currency yesterday had data on the German economy. According to the information provided, the growth of the German economy in 2018 was 1.5%, against 2.2% in 2017, which is the worst figure since 2013. Such weak German data raises concerns about a further slowdown in the entire EU economy. ECB Head Mario Draghi discussed this fact, speaking at the European Parliament in Strasbourg. In particular, he noted that the growth of the EU economy was weaker than expected, amid intensifying negative trends in the global economy. Draghi noted that monetary stimulus is needed to sustain further inflationary pressure. Since ECB completed the QE program in December, it is planned to stimulate the economy by keeping the interest rate in the negative zone.

Prospects for EU economy slowdown, as well as the continuing uncertainty of Brexit are strong factors of pressure on the European currency, so even against the background of a relatively weak dollar, the EUR / USD pair continues to decline.

Today, the situation in the UK will be in the center of attention as well as investors will be very attentive to the statistics from the USA, where a new report on retail sales will be presented.

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