Analysis

The European currency today is strengthening against the yen and the US dollar

USA, The US currency is weakening today against its main competitors – the euro, the Japanese yen and the pound.

Investors are following trade negotiations of China and the United States. Despite the condemnation by the Chinese side of the arrest of the Chief Financial Officer of Huawei Meng Wanzhou, there was no breakdown in the negotiations. Today, Liu He, Vice-Premier of the State Council of the People's Republic of China, Stephen Mnuchin, the US Treasury, and Robert Lighthizer, the American sales representative, held telephone talks to discuss the supply of American agricultural products to China and the changes in support of Chinese industry “Made in China 2025”. A schedule for further trade advice was also reviewed. Recall that on the eve of Lighthizer, citing President Donald Trump, said that the agreement with Beijing should be concluded before March 1, otherwise a new increase in US export duties is likely.

On Wednesday, data on inflation in the United States will be published. In November, the consumer price index is expected to fall from 2.5% to 2.2% on an annualized basis, but the basic consumer price index, one of the main indicators for the interest rate decision, will grow from 2.1% to 2.2%. The implementation of the forecast can strengthen the position of the US currency, as it will create another reason to raise the Fed rate.

Eurozone

The European currency today is strengthening against the yen and the US dollar and has a mixed dynamic in pair with the pound.

In general, the European currency is supported by the possibility of a compromise on the Italian budget for the next year. The Italian government can reduce the estimated state budget deficit from 2.4% to 1.95%. This figure is higher than the one which EU officials negotiated with the previous Italian government (0.8%), but it still significantly reduces the risk of Italy violating the EU budget rules.

The data on ZEW Business Sentiment published today turned out to be better than market expectations, although the number of pessimists in European business continues to prevail over optimists. In December, the indicator for Germany was -17.5 points (instead of the expected -25 points), and for the Eurozone it was -21.0 (instead of the expected -23.2 points).

On Wednesday October data on the volume of industrial production in the Eurozone will be published. According to forecasts, on a monthly basis, the indicator will grow by 0.2% after a decline of 0.3% a month earlier, and on an annualized basis, the indicator will decrease from 0.9% to 0.7%.

Great Britain

The British currency today is strengthening against the US dollar and the yen, and has mixed dynamics in pair with the euro.

Investors are paying attention to the negotiations on Brexit. On the eve of Prime Minister Theresa May cancelled the vote on the deal in the House of Commons because of the likelihood of failure. She noted that she was going to hold emergency talks with EU leaders in order to achieve new concessions, primarily on the issue of the Irish border. However, Jean-Claude Juncker and Donald Tusk have already stated that the current treaty or a separate protocol on the Irish border will not be revised. The only thing that the UK can count on is further clarification of the provisions of the Brexit deal.

The pound today is supported by positive October data from the British labor market. The unemployment rate remained at 4.1%, the average wage growth rate plus bonuses, increased from 3.1% to 3.3%, and without bonuses – from 3.2% to 3.3%. Over the last 3 months, the employment rate has increased from 23K to 79K.

Japan

The Japanese currency today is strengthening against the US dollar, but weakening against the euro and the pound.

In the absence of significant economic releases, the movement of the Japanese currency is generally technical in nature. It is worth noting the comments of the Minister of Finance of Japan Taro Aso regarding yesterday's weak GDP data. According to the official, the decline in GDP in the third quarter of this year was due to one-off factors, and in general, the state of the Japanese economy is not deteriorating.

On Wednesday the October data on orders for engineering products will be published in Japan. According to forecasts, the indicator on a monthly basis will grow by 10.2%, and in annual terms – by 5.9%. The implementation of the forecasts can provide support for the Japanese currency.

Australia

The Australian dollar today is strengthening moderately against the US dollar and yen and has mixed dynamics in pairs with the euro and the pound.

The deputy head of the RBA, Christopher Kent, recently noted that the next action of the regulator is likely to be a rate increase, but this does not mean that, the Bank will not be able to lower it. In general, the official remained optimistic, saying that the RBA is counting on a further decline in unemployment and an increase in inflation. However, the Australian business is pessimistic. The latest NAB survey showed a decline in business confidence in the country to 3 points – the lowest since 2016. Currently, support for the Australian currency is provided only by hopes for concluding a trade agreement between the United States and China, since the parties have not abandoned the negotiations, despite the arrest of the Chief Financial Officer of Huawei Meng Wanzhou.

Oil

During the day, oil quotes are rising.

Today, prices are supported by messages from the Libyan state oil company NOC about militant attacks on the country's largest field, El Sharara, because of which works were suspended there and total production fell to 315K per day. In general, the growth potential of oil prices remains weak due to global trade instability and investors' doubts about the decline in production by OPEC countries. In the evening, a weekly report on API reserves in the US will be published. If the trend towards their increase continues (the last time the volume increased by 5.360 million barrels), then oil prices may again be under pressure.

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