Despite the lull in economic activity from the civilized world, political events will still provide opportunities for trading this week.
The week will focus on two events:
- Crisis in Turkey
The Turkish lira fell by 20% against the dollar on Friday. And although the lira doesn’t appear to be such an important currency on the world stage... the general economic situation and political tensions with the US have led to the Central Bank of Turkey needing to make quick and effective decisions to stabilize their national currency. If this cannot be accomplished in the coming days, the situation could begin to spread gradually from local to European banks.
And it all started when Turkey did not support US sanctions against Iran and the issue involving an American pastor accused of terrorism who has not been extradited to the United States. US reaction was pretty fast and tough: on Friday, it announced that tariffs for Turkish steel imports will be raised to 50%, and this will come into force on Monday morning (13.08.18).
On Monday, Turkish President Recep Tayyip Erdogan spoke at the 10th annual conference in Ankara.Erdogan said that Turkey should prepare for further attacks on its economy. He also accused America of violating WTO principles. These are loud statements and even despite Erdogan's assurances that "the lira will soon settle down at a rational level," no one has confidence in this.
So, the European market will closely monitor the development of this "rocking" of the Turkish economy, which will clearly affect the overall mood on the foreign exchange market.
The general conclusion: in my opinion, the policy of introducing trade wars (an economic instrument) by US President Trump as a political measure of influence will not lead to anything good for the free market in the long run... Meanwhile, the dollar is actively strengthening due to such "scandals." Let's see how these events will develop further!
- Resumption of Brexit negotiations
Negotiations between the EU and Great Britain will resume this Thursday, 16.08.18.
Michel Barnier said that the UK will present new customs proposals to break the impasse on the Irish border, and the EU will consider the possibility
of a compromise on tariff collection on behalf of the EU after Brexit. At the moment, customs tariffs in the form in which they are being submitted by the UK are being rejected for consideration by the EU.
After the last meetings, the Bank of England raised the base rate to 0.75%. Also data on inflation will be released on Wednesday of this week, which could further strengthen the pound before the start of negotiations.
In general, the middle and second half of the week promise to be quite saturated, and it's worth keeping an eye on opportunities for trading on pairs with the pound sterling...