News background and trading ideas for 10/03/2018

Despite yesterday's decline in the GBPUSD pair, we do not plan to revise our forecasts for its future growth. Yesterday's decline is entirely due to the dollar, which was very strong. But the news from Brexit fronts is generally positive for our idea. And the point is not that there are some actual results, but how the information vector is changing about the future deal. If a week or two ago everyone was discussing the exit of Britain from the EU without a deal, now, on the contrary, the conversations are going in a constructive manner. This refers to the new plan from Theresa May and comments from the leading politicians, which are heard at the two-day conference of the Conservatives. Hammond said that the deal between EU and UK will contribute to enhancing economic growth in the UK. That is all the signs that "the ice is broken". So, while the pound is extremely low, you need to buy it. Who has already done this yearly, should add to existing position from the current prices.

Italy continues to put pressure on the euro. By and large, the story repeats itself 3 years ago with Greece. Just one to one. Populists also came to power in Italy. The country also has a lot of debt, but populists do not even think of trying to live up to the bills, continuing to pump up the already inflated national debt. Of the recent coincidences that fall just “in the bull's eye” - statements that Italy may abandon the euro in favor of its own national currency (recall, Greece threatened to return to the drachma). What is most interesting in this whole story is the end, which was obvious in case of Greece and then again it is obvious now. Tsipras (former Prime Minister of Greece and an ardent populist) was summoned to the carpet and explained in detail how this would end for Greece. After that, the country ceased to be “kinky” and agreed to the EU conditions. We believe that a similar story will happen to Italy. They are too deep in debt to dictate something to creditors. So, in this regard, we would not worry about the euro, but rather keep in mind that it is quite possible that another interesting and promising trading idea emerges - the purchase of the euro. But it is too early to talk about it, and the potential for decline has not yet been exhausted, plus the parties have not yet moved to the active phase of confrontation, as it was in the case of Greece. So, we continue to follow the situation with interest, even knowing how it will end.

We could not pass unnoticed the news that Russia has significantly increased oil production (by 150K b/d over the last month), because of which it reached a record value of 11.356 million b/d, exceeding the previous record, which was recorded in 2016. This news is interesting to us primarily because it confirms one of our basic strategic trading ideas - oil sales. The volume of oil production by Russia in September de facto confirms the death of OPEC+. And after all, the OPEC + agreement provoked the growth of oil from levels in the region of 30-40 dollars per barrel to the current 80+. So, we continue to recommend sales of oil, and with it the Russian ruble sales as well.