As problems form the purpose

The ghost of Lehman Brothers in english version 2016-2017 is already close

The English subject gradually becomes a global European problem: first system consequences begin to be shown after sharp fall of pound almost for 20%. The market has come through one more classical NFP, FRS has again declared by Yellen`s lips that USA will not change interest rates, till estimate Brexit consequence. Meanwhile the world market is not ready to use the English referendum as an occasion to begin process of a blow-off of financial bubbles.

So far in a temporary (nominal) prize there were British exporters and travel business, but the first problems of mortgage bonds and production are already visible. Local companies face growth of the price of foreign accessories and services already that can soon lead to price increase and, respectively, fall of the internal demand. Recession of activity of consumers and sales level for 11,2% is observed, besides, the labor market "has considerably sunk": one week prior to a referendum the amount of vacancies exceeded 1,5 million, and in a week - only 820 thousand.

The 50th article is not activated yet, and therefore any, even informal, negotiations with leaders of the EU are impossible. But any the agreement on trade is signed, the British banking sector will appear under the strongest blow as already actively loses part of European financial flows. Theresa May (who has got the nickname "Saint Tessa" in the English press) scoring points in race for a premier chair, already has managed to declare that negotiations on an exit of Britain from the EU will hardly begin this year, and therefore the period of fall of pound will be extended, at least, half a year - only question in the speed of this movement.

At the moment BE has no accurate strategy of salvation. Increase of rates will only aggravate an economic situation, and for decrease the program is not worked out yet. It is supposed that on Tuesday will hear the quarterly inflation statement that will open additional opportunities for the decision of Bank on Thursday.

As we would expect, the negative of May NFP is completely liquidated in spite of the fact that data of the previous report after review were even worse (+11 thousand). Correction was more than sufficient that cleans all market emotions concerning a market situation of work and possible reactions of FRS in this respect. On the other hand, behind the scenes continually there is talk on QE4, but today's data will already hardly significantly change a deal at the rates though can quite cause a short-term growth of dollar.

The dollar shall get support from placements of USA Treasury current week (on July 11-13 - auctions on notes/bonds), money shall leave the market in a national debt. On July 11 bills of exchange of US Treasury are placed, and the amount of the offer announced is record for papers of this type: $37 billion on 3-month and $32 billion on 6-month bills of exchange. Probably the US Treasury against escaping of risk continues to use a favorable environment.

Leaving of investors in a national debt with the highest rating which reduces availability of bonds to acquisition within euroQE in amount of €1,74 billion becomes a serious problem for ECB. Today nearly a third of a national debt of the eurozone does not get any more under the scheme of the redemption of assets as its profitability is lower than a deposit rate of ECB in minus of 0,4%. The regulator already faces a lack of the German, Irish and Portuguese state bonds for acquisition because of the restrictions introduced by itself. It will force ECB to change further part of rules if it is planned to keep monthly amount of the redemption of assets at the level of €80 billion till March, 2017.

From other news:

  1. There is a feeling that the ghost of Lehman Brothers English version 2016-2017 is already close: the Standard Life company has refrigerated withdrawal of funds from the real estate fund in Great Britain. And this with the fact that the company held on accounts considerable amounts of cash - just on a case of mass flight of investors. "Safety bag" of the largest fund constituted 13% of net assets (nearly $0,5 billion). Obviously, unitholders have taken away these money during the short several days after a referendum.
  2. Soros Fund Management - the managing company of Soros - has strengthened the short position on Deutsche Bank AG in the amount of 7 million shares. Problems of this German giant accrues, rumors about a possibility of its bankruptcy amplify. The bank already sustains serious losses on the main trade instruments and actively loses large customers.
  3. The Monte Paschi bank sped up work on a conclusion of bad debts (about 330 billion euros) from the current balance though disagreements between the government of Italy and European Commission are not liquidated. Creation of rescue fund is planned for €5-6 billion from the existing Atlante fund and Cassa Depositi e Prestiti state company.
  4. The amount of Asian bonds with negative percent grows - for the first time in the history 20-year bonds of Japan began to show minus profitability. Most of all Asia is afraid British papers so that it buys up all bonds of Switzerland circulation period till 50 years. That is are ready to lend to Switzerland money for half a century, without receiving anything in exchange, and even to pay extra only to keep money in francs.
  5. Australia on election results after days off has appeared under blow and risk of reducing a credit rating - all three key agencies have declared it. Any party will not be able to create the majority in the government that threatens with delay of the budget reform. It is worth paying attention to quarter statistics of a consumer price index, and before the report on inflation - to statistics on the labor market.

Except the English news, next week interest is caused by the publication of the American retail and inflation. To fans of CAD we recommend to trace a meeting of Bank of Canada - interestingly as Poloz plans to cope with instability against wildfires of Alberta, pressure upon oil and risks of economy delay of the American neighbor.

GBP/USD: Supports: 1.2910 - (1.2855/1.2845) (strong) - 1.2760 - (1.2650/1.2630) (protection); resistance: (1.3025-1.3049) (strong) - 1.3125 (very strong) - (1.3200-1.3215) - 1.3500 (strong protection). The price is in a zone of market makers of which creation of «thorns» is characteristic. A main objective of gradual fall to levels 1.2500-1.2000-1.1700-1.1500. Carefully we sell on kickbacks.

EUR/USD: Zone of strong resistance: (1.1082-1.1099) - trade will determine risks above/below. The following resistance of is not lower than 1.1120-1.1150. Intraday supports: (1.1000-1.0990) - (1.0920-1.0890) - (1.0840-1.0800) (strong protection). Prospects former - trade higher than the level 1.1200 is connected with risks of fast movement to 1.2000-1.2200. Level 1.1200 is controlled by market makers. We listen to comments of European Central Bank and we watch the American news.

作者: Navsher Bartash,
ForexChief Currency strategist