The US-China trade war remains a major instability factor for world markets. Despite the fact that on Tuesday the trades were mainly held in the green zone, there is no hope for a positive outcome regarding the confrontation. China, by introducing retaliation against unilateral actions by the United States, demonstrates its determination to uphold its interests on the assumption that the fast-growing Chinese market of more than 1 billion people is more capacious than the US, and sacrifice strategic goals in an attempt to maintain access to American markets is short-sighted.
The United States is preparing to impose a new rate of 25% for the rest of China’s exports , and the United States Trade Representative, Lighthizer, has already published a corresponding report. The mechanism is launched. Public hearings will begin on June 17th.
Rising risks continue to limit the demand for risky assets. This will later on benefit the gold, the dollar and the Japanese yen.
The indicator of economic sentiment for Germany fell in May by 5.2 p, dropping to negative zone to -2.1 p. The decline in the indicator indicates that financial market experts continue to expect moderate economic growth in Germany over the next 6 months, while further deterioration is likely, given the fact that the trade war between the United States and China has not been taken into account in the survey, which casts doubt on stability German exports.
The similar index in the eurozone also looks weak – the indicator of economic sentiment is -1.6%, the current situation has improved by 6.2 p, but it is still in the negative zone of the -7.0p.
The weak economic outlook for the eurozone is also reflected in Eurostat data. Industrial production fell for the second month in a row. In March, a decrease of 0.3% was reported on an annualized basis, a decrease of 0.6%, for a year and a half. There has been no positive trend.
Today, preliminary data on the GDP of the eurozone countries will be published, and two representatives of the ECB are expected to speak at once – Kera and Pratt. The activity of officials this week is quite high. On Thursday, there will be 4 statements by Draghi’s deputies at once, including the head of the Bundesbank, Weidmann, who reasonably expects to assume the position of head of the ECB after the end of the mandate of Mario Draghi.
On Friday, inflation data will be published , and before the publication of the euro will look uncertain. There are no reasons for resuming a bullish trend, as weak macroeconomic data is combined with increased uncertainty about the trade war and the approach of the start of parliamentary elections, which can change the political configuration in Europe. May 18, Trump must decide on the possibility of introducing tariffs on European cars, which poses a risk in the European economy.
EURUSD tends to 1.1165 / 73 zone, where the issue of increasing downward pressure or returning to current levels will be addressed.
The unemployment rate in UK fell in January-March to 3.8% versus 3.9% a month earlier, and this is the lowest figure since 1974.
The employment situation looks confidently stable, but reaching a record level did not help the trading for pound on Tuesday. The reason for this is a noticeable decrease in the average wage, taking into account bonuses from 3.5% to 3.2%, which is a threat to the stability of consumer demand and is capable of questioning inflation forecasts.
Recall that the Bank of England at the beginning of May published a quarterly report on inflation, in which he substantiated his forecast for a rise in prices by 2.1% y / y with the expectation that in April, inflation would increase due to energy carriers and retail trade. Reducing employee incomes can have the opposite effect and calls into question price increases in the near future, and hence the Bank of England rate strategy.
The pound, thus, received a negative impulse, which immediately won back, falling to 1.29. The likelihood that the downward movement will continue, remains high. The next is the support at 1.2864. Fixing below it allows the way to 1.2772.
The material has been provided by InstaForex Company – www.instaforex.com