Traders continue to ponder yesterday's statements by US President Donald Trump about progress in negotiations with China.
If at the end of last week, Trump called Xi almost the main enemy of the United States, yesterday he announced some progress that, in his opinion, would help to conclude a deal. There is no specifics, as usual, but the dollar clearly reacted to this growth against the euro and the pound. If the pound has already regained all positions and is again in demand, again, exclusively speculative, then the euro continued to trade in a narrow channel after the release of the German economic growth report.
Let me remind you that in recent weeks, tension in trade relations has overshadowed the prospects for the US economy, which by itself has strengthened expectations of a further reduction in interest rates in the United States to support GDP growth. The chairman of the Federal Reserve spoke about this at the end of last week. Lower rates - weakening dollar.
As I noted above, according to official figures, in the 2nd quarter of this year, compared with the 1st quarter, the German economy was expected to contract against the backdrop of worsening trade conflicts and a slowdown in global economic growth. Not surprisingly, the main problem was a sharp decline in foreign trade, while consumption and a slight increase in investment supported the economy.
According to data, German GDP fell by 0.1% in the 2nd quarter compared to the 1st quarter. GDP grew by 0.4% compared to the 2nd quarter of last year. As I noted above, personal consumption grew by 0.1%, and government spending increased by 0.5%.
The contraction in the economy indicates stagnation in the short term. Recent polls also indicate a decline in German GDP in the 3rd quarter, which would mean a technical recession.
Data on the growth of consumer confidence in France did not greatly interest traders. According to the report, the consumer confidence index in France remained unchanged in August at 102 points compared with July, which fully coincided with the forecasts of economists.
But the mood in business circles of France improved and rose to 102 points in August against 101 points in July. Economists had expected the index to remain unchanged.
As for the technical picture of the EURUSD pair, it remained unchanged compared to the morning forecast. If yesterday it was possible to talk about the likely continuation of the growth of risky assets, then today, after the pair returned to support 1.1120, the prospects worsened. Bulls will need a lot of effort to cope with the level of 1.1120, since it will be possible to again discuss the topic of the euro's continued growth to a high of 1.1160 above this range. A break of support of 1.1080 will provide bears with new forces, which will push the trading instrument into the area of August lows.
