On the market, there are still strong expectations, which are fueled by the American press, that a new trade agreement between the USA and the PRC may still be concluded at the G20 summit.
This factor is the main triggering growth in demand for risky assets and the US dollar. On Tuesday, the media released a statement by L. Kudlow, director of the National Economic Council, that the agreement between D. Trump and PRC Chairman Xi Jinping is "an opportunity to start a new page." On this wave, there is a cautious optimism among investors that support the demand for risky assets, and not only in the countries with developed economies but also with the developing one.
On this wave, the dollar is receiving attention because of the growing demand for dollar assets from non-residents, but it is also supported by the comments of the above-mentioned Kudlow and Fed Vice Chairman R. Clarida, who said he considers it appropriate for a further gradual increase in US interest rates.
In our opinion, if today, in his commentary, the head of the Federal Reserve, J. Powell, will stand on the need to continue the continuous cycle of raising interest rates. This will only strengthen the position of the US currency, which can continue the pressure, primarily on the British pound and the single currency.
Regarding the situation with the sterling and the euro, the growing likelihood of T. May resigning due to the Brexit agreement that is unfavorable for Britain, as well as the apparent crisis in Italy, which can really force the ECB to buy local government bonds on an individual basis to continue their decline against the us dollar.
Commodity currencies are consolidated in anticipation of the outcome of the G20 summit. If an imputed agreement is reached there, they will have to get support. At the same time, if this does not happen, they will again be under strong pressure against the dollar.
Forecast of the day:
The EUR / USD currency pair is trading above the level of 1.1280 in the wake of the expectation that today, in his commentary, Fed Chairman J. Powell stands out against the continuation of the interest rate increase cycle in the States. Overcoming the price level of 1.1280 may lead to a resumption of its decline to 1.1215.
The GBP / USD currency pair is trading above the level of 1.2720. The pair may continue to decline in the wake of the high probability of T. May's resignation from the post of prime minister due to the extremely unsuccessful option of leaving Britain from the EU. Against this background, the fall in prices below 1.2720 may lead to its decline to 1.2620.
