EURUSD: US accuses China of disrupting trade negotiations. Demand for safe-haven assets will increase
Yesterday, the euro was limited in growth against the US dollar, as well as the British pound. The growing tension in the negotiations between the US and China affected the stock markets again, which also partially affected the currency market.
Also yesterday, during his speech, US sales representative Lighthizer stated that China refuses to fulfill its previous commitments during the negotiations, in connection with which the US will increase duties on Chinese imports worth $ 200 billion from 10% to 25% this Friday. In addition, Lighthizer noted that throughout the past week, the White House has been observing the erosion of China’s commitments, which is forcing the administration to return to the previous plan associated with the increase in duties. Further negotiations with representatives of China will continue on Thursday and Friday. Why China’s position has changed so drastically? Robert Lighthizer is uncertain.
Similar statements were made by the US Treasury Secretary, Steven Mnuchin.
Moreover, what will lead to further negotiations is unclear. However, the demand for safe-haven assets, such as the Japanese yen and the Swiss franc, may increase significantly in the near future.
As for the data yesterday, only the employment trends index in the United States came out in the second half of the day, which increased in April of this year compared with the previous month. According to the Conference Board report, the employment trend index was at the level of 110.79 points against the revised March value of 110.73 points. The Conference Board said that the expectation of a significant slowdown in the US economy is gradually weakening, but the forecast for employment growth in the next few quarters is acquiring more positive features.
The next speech of the representative of the Fed remained unattended by the market.
Meanwhile, the President of the Federal Reserve Bank of Philadelphia, Patrick Harker, said yesterday that he is still expecting one rate increase in 2019 and one in 2020. However, inflation is the key to the future policy of the Fed. Harker suggests that the recent weakness in inflation is temporary, and still expects it to be just over 2% in the medium term.
As for the economic growth, it may be a little over 2% this year, since the latest data on US GDP for the 1st quarter of this year were clearly above the expectations.
Among the main risks associated with further economic growth, Harker attributed trade restrictions and duties that will harm the health of the economy, since negotiations with China may be disrupted.
As for the technical picture of the EURUSD pair, further prospects for the movement of the trading instrument seem vague. Bears can prove themselves after returning and updating the resistance level of 1.1220, while the bulls will be clearly set to hold a large support of 1.1180. From which, an attempt will be made to build the lower boundary of the new ascending channel. The purpose of the bulls will be to update the highs last week which is around 1.1260 while the purpose of the bears are the lows last April in the area of 1.1110.
The material has been provided by InstaForex Company – www.instaforex.com