EURUSD becomes cautious ahead of Brexit Vote


October 18, 2019, | AtoZ MarketsThe UK Parliament vote will be held on Saturday and investors have become cautious in response to the firm opposition from the DUP & BREXIT. In addition, the possibility of the economic recession of Germany in Q3 remains a substantial risk for the outlook of EUR.

Let’s dive deeper into EURUSD fundamental outlook as the pair becomes cautious ahead of Brexit Vote

EURUSD Fundamental Outlook – 18 October 2019

European Union leaders will discuss the new budget plan today that could allow them to spend up to 1.1 trillion euros between 2021 to 2027 period.  On the other hand, Italy’s government is planning to set a single tax bracket for lower incomes.  Prime Minister Giuseppe Conte noted this by two newspapers today.

The Italian trade balance has dropped from 7.62B to 2.59B in august 2019. Current Account figures for the month of August have increased from 21.6B to 26.6B, where the expectations were a decrease of 21.3B. In the financial account, the net acquisitions of foreign portfolio investment securities by Euro area resident totaling decreased from €411B to €153B in the 12-month period to August 2019 while the non-residents made an increase of €208B, up from €153 billion.

The Chinese GDP for the third quarter has disappointed with an annual growth rate of 6%. That is the lowest since 1990. However, German economic growth heavily depended on exports to China.

Euro area current account balance

In the US, the Philly Fed Manufacturing Index has dropped from 12.0 to 5.6 for the month of October. The results from the October Manufacturing Business Outlook Survey indicates a growth in the manufacturing activity in the US. The building permits remained above the expectation of 1.34M but below the previous value of 1.43M, coming at 1.39M. The US industrial output fell 0.4% in September against the expectations of 0.2%.  The details report showed that manufacturing continues to be the main struggle, falling -0.5% MoM/ and 0.9% YoY. It is not facilitated by the United Auto Workers’ strike at GM.

Philly Fed Manufacturing Index

The President of the New York branch of the Federal Reserve stated that the US economy seemed unwilling to cut interest rates once again. Moreover, there are several speeches pending today from the FOMC members that will indicate further economic decisions for the US economy.

Overall, besides the speech of the FOMC members, there are no substantial European events pending today. The significant event level of 1.110 is a very important level to watch for today.

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