Donald Trump robbed the markets of hopes for a deal between the two of the world's largest economies - the United States and China. On Monday, trading began with a sharp demand for defensive assets, whereas earlier the markets laid the final signing of a trade deal this week in quotes.
Preferences from what is happening has been received, including the Japanese yen. At the opening of the week, the USD/JPY pair lost more than 70 points. The lowest record in Asian trading amounted to 110.27. Friday's release on US wages data, which disappointed traders, added to the pair's negative. At the moment, the USD/JPY pair has enough fundamental grounds for a further decline to the support of 110. This mark may well become the first target before even more serious dollar losses.
Two reasons to buy the euro
The EUR/USD pair opened a new week with a gap down due to flight from risk. However, in the European session, the single currency was able to return to the level of $1.12. Note that in a broader perspective, trade conflicts and a slowdown in the global as well as the Chinese economy often form a downward trend in EUR/USD.
As for the very near future, the euro at the start of the new week can demonstrate the growth of quotations primarily due to the acceleration of inflation in the region. The indicator reached 1.7%, which is the highest level in the last six months. This is great news for the euro, now the rumors on the topic of the new QE by the ECB will go to the background. The restraining factor for the strengthening of the euro since March 8 was precisely the talk about the need to buy back bonds. On that day, Mario Draghi announced plans for a new round of LTRO in the fall, and also announced the implementation of the QE program if necessary. Now inflation in Europe is growing, which means there is no urgent need for this program.
The second reason is the publication of ambiguous data on labor in the United States, which made it clear that inflation in the country has not yet accelerated. The average earnings in the United States in April amounted to 3.2%, which is below market expectations. Thus, the dollar received a moderately negative signal.
What's with the pound?
There is a mixed background on the sterling. On Friday, it went sharply rose against the dollar than any other major currencies. Now the pound looks noticeably overbought.
It should also be noted that in the evening hours of Friday, it came very close to the powerful weekly resistance zone. Therefore, from a technical point of view, it is now easier for it to move down than up. Moreover, the position of the Bank of England leaves no hope for tightening policies, not only in the coming months, but also in the long term. Naturally, it plays against the pound.
On Tuesday, a new round of talks on Brexit will begin, which is bound to disturb the national currency of Great Britain, which is now falling in price.
On Sunday, representatives of the opposition expressed doubts that they would be able to find a compromise with Teresa May. According to them, it is difficult and meaningless to negotiate with the prime minister, who can leave her post at any time, and her successor will break all agreements.
The material has been provided by InstaForex Company - www.instaforex.com