Trade conversations, US inflation and a tough day ahead

15 Jan 2020

Tuesday in the news plan was noted by the information that the United States excluded China from the list of currency manipulators countries. This led to yet another sigh of relief among investors that already are in a rather relaxed on the eve of the signing of the documents on the first phase of the trade agreement between the US and China.

But at the same time, we did not see any significant development of the downward movement in the safe havens. This suggests that interest in the sale is beginning to decline. Plus, there was information about another attack on a military base in Iraq. So today we will continue to look for points for purchases of gold and the Japanese yen. We only note that in the first place we will not buy the yen against the dollar but against the euro.

And do not forget to put your feet. The signing of a trade agreement between the US and China will take place today, which may well provoke another round of sales of safe-haven assets. So those who adhere to more conservative trading today should stay away from gold and the Japanese yen.

Not that we were very worried about the growth of the dollar, but yesterday's data on consumer inflation turned out to be slightly lower than forecasts, which means we should not expect an increase in the Fed rate in current realities. And all the same, the percentage differential of the dollar-yen is several times higher than the differential of the euro-yen, so the sale of the EUR/JPY pair looks truer.

Interesting fact. By excluding China from the list of manipulating countries, the United States threatened to add Switzerland there. However, the franc did not bother him and he showed the strongest growth against the euro over the past few years.

Returning to yesterday's inflation statistics from the United States, we note that the probability of a rate hike in 2020 at the moment is 5%. But the chances of a decrease are about 55%. At the same time, some experts expect 3 more rate cuts in 2020. Against the backdrop of the Fed's aggression in the repo market, this does not seem to be something completely unbelievable. Which in turn makes the dollar vulnerable in the foreign exchange market.

The British pound is still a great candidate for purchases against the dollar. But today you should be careful. Since it will be published a large block of statistics on the UK, which includes consumer and industrial inflation. Recall that while the pound is above 1.2960 there is no threat to purchases. The departure of the pair below this mark is a signal for a temporary exit from positions and a rebound at the low of 1.28.