submitted by Maxvelgus to Finance_analytics [link] [comments]
Fundamental Pound forecast for today
Sterling is focused on foreign factors and ignores domestic negative dataThe GBP is still moving according to foreign factors because of the lack of important events in the economic calendar and expectations of the virtual gathering of the world’s central bankers in Jackson Hole. Investors pay no attention to the negative factors associated with Brexit, twin deficits (budget deficit and current account deficit), and the first-ever excess of the UK national debt over £2 trillion. Forex analysts suggest that if the euro breaks higher than $1.2 and moves on towards $1.25, the sterling will easily reach $1.35.
The options market is surprisingly stable without any response to Brexit issues. A year ago, the pound volatility will higher than that of the Mexican peso, and the market was shaken. The sterling volatility over the next 3 months is below the average for the last 5 years and slightly above the euro volatility. Taking into account that the EU-UK talks are close to the critical point, the market stability looks surprising. It suggests that either investors are confident in a soon Brexit deal or they do not expect that any of the parties will add uncertainty. However, a 60% likelihood of a Brexit deal doesn’t rule out a 40% chance of a no-deal divorce. It seems that after any failure in the previous negotiations, investors expect a breakthrough in each next round.
According to JP Morgan, a no-deal Brexit will contract the UK GDP by 5.5%, and the UK economy is already in a recession. There are several bearish drivers for the sterling. The twin deficits, the Conservatives’ discontent with the growth of the UK national debt, the second wave of COVID-19 in Europe, and the potentially vulnerable labor market due to the expiration of the financial aid package in October. According to Bloomberg, the programs, which have protected four million jobs should end in October. That could hit the labor market, slow down the GDP in the fourth quarter, and result in a boost of the UK QE by £100 billion.
Dynamics of UK jobs supported by state programs
So, the pound has many flaws. However, it has caught the tailwinds and responds to the increase in the global risk appetite and the Fed’s willingness to weaken the US dollar through the average inflation targeting. Nonetheless, Jerome Powell may not announce such a plan in Jackson Hole. Furthermore, the S&P500 may not be close to the all-time highs for a long time. According to the majority of 200 experts surveyed by Reuters, global stock indexes at the end of 2020 are likely to be lower than the levels hit in February, which means a correction down from the current levels.
Dynamics of GBP/USD and S&P 500
Source: Trading Economics
In my opinion, investors ignore the UK's negative domestic factors because they are focused on Powell’s upcoming speech. If he announces the Fed’s average inflation targeting, the GBP/USD may break through the August highs and continue rallying up to 1.337 and 1.35. Otherwise, the sterling could go down below the support at 1.315.
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ISTANBUL - Turkey's banking watchdog said it had launched an investigation into JP Morgan and other banks over complaints it received after the lira plunged more than 4 percent and the main share index fell sharply on Friday.
The BDDK watchdog said on Saturday it received complaints that a report JP Morgan published on Friday hurt the reputation of Turkish banks and caused volatility in financial markets.
The Capital Markets Board of Turkey also said it had launched a probe after receiving complaints that a JP Morgan report was "Misleading" and caused speculation on the Istanbul bourse.
The central bank said on Friday it was suspending one-week repo auctions "For a period of time", a policy tightening move to squeeze market liquidity and support the lira.
A copy of the JP Morgan report seen by Reuters said it saw a high risk that the lira would decline after local elections set for 31 March, recommending clients to go 'long' on the U.S. dollar.
The watchdog did not say which those banks were, or if they were Turkish or foreign.
JP Morgan’s FX volatility index – a measure of expected volatility in the future based on options prices – has dropped to a record low of 5.21, as noted by Jeroen Blokland, Portfolio Manager for the Robeco Multi-Asset funds, Robeco ONE and Robeco Pension Return Portfolio. Past FX volatility slumps have preceded big moves in the US dollar. J.P.Morgan is a leading provider of investable indices. This website provides clients with comprehensive coverage of J.P.Morgan's investable indices and strategies available across asset classes and regions. The website gives access to index information and descriptions, performance data and risk/return statistics. JP Morgan has launched indexes tracking the level of implied volatility in G7 and emerging market economies. The VXY and EM-VXY indexes follow aggregate volatility in currencies through a turnover-weighted index of G7 and emerging market volatility, based on three-month at-the-money forward options. JP Morgan's FX volatility index – a measure of expected volatility in the future based on options prices – has dropped to a record low of 5.21, as not The JP Morgan Global FX Volatility Index is now warning of an imminent explosion in the US dollar. Over the past 25 years, there have only been three troughs in the index and each time the US dollar exploded 10%. The volatility index is now trading at the lowest in five years, making a new fourth trough. In this article, we explore the possible scenarios for what could be a record move in the ... Until last month FX volatility was in the doldrums, so much so that we saw the JP Morgan G7 Currency Volatility Index plummet to a record low under 5. Extremely easy monetary policy (and the so ... J.P. Morgan’s website and/or mobile terms, privacy and security policies don’t apply to the site or app you're about to visit. Please review its terms, privacy and security policies to see how they apply to you. J.P. Morgan isn’t responsible for (and doesn’t provide) any products, services or content at this third-party site or app, except for products and services that explicitly ...
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