Euro is looking at the markets

Forex and stock market trends signal a soon recovery of global and European economies
What came first, the chicken or the egg? Do markets reflect what is going to be in the economy, or the economy is driving the markets in a particular direction? When I look at the S&P 500, I see a soon V-shaped rebound. This is what the markets signal, although the Fed’s officials, the members of the Congressional Budget Office, and numerous experts say that the US GDP recovery will take a long time. When I look at the GBP, I see at least the extension of the Brexit deadline or even a soon signing of the trade deal between the UK and the EU. Although Boris Johnson’s government is unwilling to follow either of the scenarios.

Yes, euro gains back its old benefit, the hope that the Brexit matters will be settled down easily. The divorce, in any sense, is not an easy matter. Divorce is associated with significant financial costs in exchange for independence and peace of mind. The divorce of the UK and the EU is no exception. Both sides will suffer, and most of the negative was priced in the sterling’s quotes until recently. Once investors gained back the hope for the Brexit deal, they have started exiting the GBP/USD shorts. According to Bloomberg's source familiar with the matter, the European Union will try to convince Boris Johnson to forge a compromise later this month in an attempt to stop the U.K. from breaking away from the bloc without a trade deal.

The stronger pound supports the euro. The euro-dollar risk reversals have entered the positive area for the first time since March, which signals the EUR/USD market is bullish.

Dynamics of EUR/USD risk reversals

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