The euro and the pound rose slightly against the US dollar after more than a weak report on producer price increases in the US. However, the growth potential of risky assets is limited by decisions of central banks, which will become known today in the afternoon.
The European Central Bank and the Bank of England
It is expected that the European Central Bank and the Bank of England will not change their monetary policy.
However, traders will closely monitor what ECB President Mario Draghi will say, especially in terms of the first rate hike since the 2008 crisis. Also, the plans of the regulator to reduce the asset buy-back program, which is scheduled for completion by the end of this year, will be important. If nothing changes in the rhetoric of the ECB and everything goes according to the plan planned for this spring, the euro can strengthen its positions against the US dollar and a number of other world currencies.
It is worth noting that recently, the yield of government bonds has decreased noticeably, as investors expect in case the authorities do not signal about the transition to a more stringent monetary and credit policy.
The Bank of England is likely to note a good economic momentum in August this year, which will make its statements more stringent with regard to further prospects for monetary policy. However, a number of experts predict that the English regulator will continue to signal an increase in the interest rate during the year.
An important situation around Brexit, which can cross out all plans of the Bank of England at one point. Brexit remains the number one problem, and it is understood not only by the English regulator, but also by the representatives of the European Union, whose economy is also under attack.
Donald Trump and the Trade War
Traders and investors also closely follow the negotiations and trade disputes between the US and its main partners. The failed negotiations between the EU and US representatives, as well as the trade war with China, do not give many investors the freedom to act. It is also necessary to pay attention to the risks associated with emerging market economies. It's about countries like Turkey and Argentina.
More recently, US President Donald Trump said progress in the negotiations between the two countries. According to Trump, there is a variant of concluding a new version of the North American Free Trade Agreement between the United States, Mexico, and Canada.
The good news that the US is proposing a new round of negotiations on trade with China in the near future, also yesterday supported the markets of risky assets.
Yesterday's statements by representatives of the Federal Reserve System did not affect the rate of the US dollar.
The head of the Federal Reserve Bank of St. Louis James Bullard expects that problems in the relationship between the US and China will be observed for a long period of time. However, in his view, the policy of the Trump administration has improved the economy's potential, and the economic growth rates will be revised upward.
The Fed's Beige Book
The publication of the Beige Book by the Fed also pointed to good prospects for the US economy.
The report noted that the US economy grew at a moderate pace in late August this year. The increase in employment in most of the US territory makes it possible to forecast further economic growth in the country. Fears are caused only by a shortage of qualified specialists in many regions. The report also indicates that the growth rate of wages was modest, while prices continued to grow at a moderate pace in most regions.
The technical picture of the EUR / USD currency pair remained unchanged.
Only a break of the level of 1.1650 will lead to the resumption of the upward trend in euro with a test of highs of 1.1690 and 1.1730. Otherwise, a return to support level 1.1600 and 1.1570 could put even more pressure on risky assets, which will collapse the trading instrument to the lows of 1.1530 and 1.1450.
