Analysis

The euro is strengthening today against USD and the pound but has ambiguous dynamics with the yen

United States of America, USD is today declining against the euro and the yen and shows an ambiguous dynamics with the pound.

Investors are focused on the situation around the US government, which is partially closed for the sixth consecutive day and probably will not resume work until early January. Even then, the future of its financing will remain vague. In January, a new House of Representatives will gather, the majority of which will be taken by the Democratic Party. It is not clear whether they will approve the financing of building a wall on the border with Mexico. The closure of government agencies may adversely affect the publication of economic statistics. Probably, the key data on inflation and employment will be released in time, but the publication of the rest can be put off. Tonight, data on sales of new houses in the US is expected, but it is not yet known whether the publication will occur. Investors expect that in November the figure will grow from 544K to 569K. However, one should note the comments of Kevin Hassett, economic advisor to President Donald Trump, who noted that Jerome Powell and Stephen Mnuchin are not under threat of dismissal.

Eurozone

The euro is strengthening today against USD and the pound but has ambiguous dynamics with the yen.

In the absence of significant economic releases, EUR is traded under the influence of US and British news. Investors are following the continuation of the "shutdown" in the United States and transfer funds from the dollar to the euro. One should also note the publication today of the eighth economic bulletin of the ECB, which, in particular, confirms the intention of the regulator to stop buying assets in December. The document also informs that the ECB hopes that the strength of domestic demand will lead to a gradual increase in inflation. However, since the threats of protectionism and financial market instability remain, monetary incentives in the Eurozone should remain unchanged.

On Friday, the preliminary December inflation data in Germany will be published. The consumer price index is expected to rise from 0.1% to 0.3% MoM and to decline from 2.2% to 1.9% YoY.

United Kingdom

Today, the pound is weakening to the yen and the euro and has an ambiguous dynamics with the dollar.

The British currency is pressured by the results of a survey of the management of the largest British companies by the Institute of Directors (IoD). According to it, 57% of the more than 700 directors surveyed believe that next year the economic situation in the country will worsen, and only 20% hope that it will improve. Thus, the number of pessimists in the British business environment is now the largest since the Brexit vote.

Japan

Today, JPY is strengthening against USD and GBP and shows an ambiguous dynamics with EUR.

In the absence of significant economic releases from Japan, the yen is trading under the influence of US and European news. The market is preparing for a block of important statistics, primarily on retail sales and industrial production, to be published on Friday. Retail sales in November are expected to grow by 2.2%, which is significantly lower than the previous figure of 3.5%. The volume of industrial output will decrease by 1.7%. The realization of the forecast can put pressure on JPY.

Australia

AUD today is generally weakening to the main competitors - the US dollar, the yen, the euro, and the pound.

In the absence of significant economic releases, AUD is traded under the influence of US and European news. Investors are monitoring the situation around the partial suspension of the work of the American government, which is likely not to resume work until January, as well as the US-Chinese trade negotiations. According to the Ministry of Commerce of China, the parties have developed a plan for personal consultations on trade issues. They would be held in January.

Oil

Today, oil quotes are falling again.

Generally, prices are under pressure of the reducing US stock market. In the evening, investors are waiting for the publication of a report on oil reserves by API, which was postponed due to the Christmas holidays. The last time stocks rose by 3.450 million barrels, and the continuation of the trend could put pressure on prices. The publication of a similar report from the EIA may be postponed due to the “shutdown”.

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