Those who seriously hoped that Donald Trump would not start a new trade war before the next presidential election in the United States seemed to be mistaken. The World Economic Forum in Davos has confirmed this. During his public speech, the head of the White House emphasized the dignity of the American economy. On the sidelines of the forum, he expressed dissatisfaction with the huge deficit in US foreign trade with the European Union and announced his intention to introduce duties on car imports to America from the Old World if Washington and Brussels fail to reach a trade agreement. Against this background, a single European currency, barely able to find the ground under its feet thanks to reports of a trade ceasefire between the United States and France before the end of 2020, was sent to another knockdown.
Apparently, the trade conflict between the US and the EU is not included in the plans of the bulls for EUR/USD. The trade war between Washington and Beijing dealt a serious blow to the export-oriented economy of the eurozone. What will become of it if large-scale American duties on European products are introduced? Brussels promises to introduce $ 60 billion in fees for delivering goods and services from the United States in response to an increase in US import tariffs for cars and parts from the EU of $ 60 billion. So, we have already seen what the increase in duties for international trade and world GDP can turn out to be.
Trump did not just praise the American economy at the Davos forum. He stated that her power allowed the United States to celebrate victory in a trade war with China.
"America is growing, America is thriving and winning like never before," the American leader proclaimed.
The dollar reacted to the fiery speech of the US president with growth, primarily due to the principle of "strong economy - strong currency".
However, the World Bank, the IMF and the OECD do not count on the rapid recovery of the global economy in 2020. The White House promises to lower taxes for the middle class once again, which contributed to the acceleration of US GDP growth rates to almost 3% in 2018. If the divergence between global and US GDP does not expand, then the USD index will continue to confidently go upwards, and a new trade war will be in the hands of the "bears" in EUR/USD.
On the other hand, recovery of the introduction of US import duties on European cars forced investors to turn a blind eye to the positive from the German economic sentiment index ZEW. The figure rose to its highest level in more than 4 years, thanks to the trade truce of Washington and Beijing and the optimism of the Bundesbank, which said that German industry had touched the bottom. If it weren't for the threat of a US-EU trade war appearing on the horizon again, the euro would have reacted to strong data with growth against major currencies.
Meanwhile, the first decline in demand for bank loans in the eurozone in the last 6 years is an alarming bell for the currency block economy, as well as for the ECB, which is trying to increase this demand by reducing deposit rates and renewing QE. If ECB President Christine Lagarde and her colleagues express concerns about a new trade war and a further slowdown in the European economy instead of moderate optimism at the regulator's meeting on January 23, then support at 1.1070 and 1.1055 may not resist the pressure of the "bears" in EUR / USD.
The material has been provided by InstaForex Company - www.instaforex.com