Brexit & pound, IMF forecasts and Bank of Japan plans

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The pound is a focus of attention of the forex market. Because Brexit is entering final straight. Yesterday the European Commission's chief negotiator Michel Barnier said that Brexit deal within reach in last-ditch talks, but doubts remain. And then there was information that the legally agreed text will be presented to the delegations of the EU and the UK no later than Wednesday morning.

On the whole, we cannot but note the positive attitude of the parties, which only strengthens us in the desire to buy the pound. Recall, there is a potential pound value growth. UK labour market data released yesterday (came out pretty weak), once again showed that Brexit is only the pound traders are interested in. So we continue to pay attention to this issue. We still have time for pound purchases at affordable prices, but it is running out.

IMF cuts global growth forecast. In 2019, global GDP growth is expected to reach 3% (this is 0.3% lower than the previous IMF forecast), and in 2020 the growth rate will be 3.4% (0.2% lower than the previous forecast). We note that the rate of economic growth in 2019 has been revised to the worst one since the financial crisis of 2008-2009. The IMF noted that the damage from trade wars is equal to the Swiss economy.

In general, that is bad news for commodity and stock markets, as well as currencies such as the Canadian and Australian dollars. But good for safe-haven assets buyers.

The US decided to hint to Turkey that a ground invasion against Kurdish people might not be the best idea. We are talking about US sanctions against Turkey, announced by Trump, as well as Volkswagen's decision to suspend the construction of an automobile plant in Turkey (price tag $ 1.4 billion). While no reaction from the financial markets to this has followed, we decided to leave our recommendations for the purchase of safe-haven assets (gold and the Japanese yen). So today we will continue to look for intraday long positions to open.

Information that the Bank of Japan is preparing to reduce the volume of investments in bonds. The event is nontrivial. 10 years ago the Central Bank did that. We interpret this signal as monetary tightening. The yield increase in the Japanese bond market may well trigger a strengthening of the yen. In this light, our recommendation to buy the yen seems reasonable. Leading global analysts predict target 100 for the USD JPY.