The NFIB index of business optimism in small business continues to remain at high levels not seen since the pre-crisis times of the junior Bush presidency. For a long time, respondents noted the dominance of state regulation and bureaucracy under Obama but Trump's reforms have a noticeable positive effect in reducing taxes and government participation in regulation has a beneficial effect on business sentiment.
The index of economic optimism from IBD/TIPP in April also maintains its position at a high level with a slight decrease from 55.7p a month earlier to 54.2p, which suggests that the index from the University of Michigan on Friday also will not show a decline.
The inflation data in March will be published today. It is expected that core inflation will remain at the same level of 2.1% and any change may cause an increase in dollar volatility.
Tonight, the minutes of the March FOMC meeting will be published, which has become noticeably more dovish than predicted. Trump will gradually replace the hawks in the Fed with more moderate financiers, forcing the Fed to abandon its plan to normalize interest rates. From this point of view, the Protocol will focus regarding the arguments of the FOMC members on the rates and on the balance reduction policy, since the nuances of the new approach have not yet been made public.
The threat of another trade war, this time between the US and the EU, increases risks, markets yesterday reacted with a fall in stock indices and an increase in demand for defensive assets, which led to a slight decrease in commodity prices and an increase in demand for gold and the Japanese yen. Today, the trend is likely to continue and commodity currencies will be under pressure.
EUR / USD pair
Today, the ECB will hold a regular meeting on monetary policy. No changes in macroeconomic forecasts are planned and all attention will be focused on the press conference of Mario Draghi. Markets want to hear confirmation of the inflation estimate to be just a temporary slowdown, which will keep optimism about the prospects for the euro. However, Draghi can add a few tragic notes on the economic growth rate.
On the eve of the Sentix, stabilization of the situation in the eurozone was noted, despite the index falling for the eighth consecutive month to 3.8p in April. It is acknowledged that expectations are rising for the third consecutive month, which means a slowdown of the negative impulse.
The euro looks confident by the end of the day a slight increase is possible. The nearest resistance of 1.1284 will most likely be passed before the ECB meeting. The overall focus of the EUR/USD pair will be on the technical resistance of 1.1330.
GBP / USD pair
In the evening, EU leaders will gather at an extraordinary summit to decide on granting the UK another postponement of Brexit. Yesterday, the head of the EU Donald Tusk circulated a letter in which he called for extending Brexit for a year with the right of an early exit if the transaction passes through the House of Commons. At the moment, such a scenario is considered a priority since it will allow the parties to get out of the problem with time. On the eve of the House of Commons finally adopted a bill to postpone exit, the document was promptly approved by the Queen and now what only matters is the decision of the EU leaders.
Pound did not respond to the decision of the parliament, which indicates that the markets consider the extension of Brexit, in fact, the matter has already been resolved. Volatility will increase throughout the day because along with political issues important economic data, particularly reports on industrial production, trade balance and GDP will be published.
The pound remains neutral and psychological levels of support at 1.2960/85 and resistance at 1.3090/95. The direction of the out of range will be determined at the EU summit.
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