FX.co ★ Review of GBP/USD as of June 20, 2018

How many do not try to convince themselves that after Brexit the pound and the single European currency began to live their lives, over and over again, reality puts everything in its place. On Tuesday, the pound was once again forced to follow the single European currency. And to follow downwards. And as it has become familiar in recent years, the culprit of the celebration was Mario Draghi. Although the ECB extended the quantitative easing program until December, and postponed the issue of raising the refinancing rate until next summer, investors had many questions during the press conference that followed immediately after the ECB's meeting on the monetary policy. In particular, they were interested in the possibility of extending the program of quantitative easing after December, as well as clarification of the situation regarding the criteria for raising the refinancing rate. The fact is that the ECB previously stated that when inflation reaches 2.0%, the regulator will begin to consider raising the refinancing rate. So, inflation has already risen to 1.9%, and the ECB only further postpones the issue of raising the refinancing rate. We must pay tribute to Mario Draghi, as on Tuesday he gave answers to these questions. Only now they did not like the market participants. Now the ECB says that the quantitative easing program is not in place to disperse inflation and accelerate economic growth, but to smooth out the possible negative due to the trade war with the United States. Also, the issue of raising the refinancing rate will be considered only after the completion of the quantitative easing program. Thus, a change in the priorities of the ECB indicates that the quantitative easing program will be extended after December of this year. Naturally, this caused a serious decline in the single European currency, and it already through the dollar index pulled other currencies.

If we eliminate Mario Draghi's speech on Tuesday, there were simply no other reasons for weakening the pound. Data on the construction industry in the US, although it turned out to be quite good, further prospects are rather vague. Thus, the number of construction projects increased from 1,286 thousand to 1,350 thousand. But the number of issued construction permits decreased from 1,364 thousand to 1,301 thousand, which indicates a rapid decline in construction.

On Wednesday, the US is projected to increase housing sales in the secondary market from 5.46 million to 5.52 million, however, given the strong oversold pound, it will not allow the dollar to strengthen, so the pound will consolidate at 1.3175.