The market was enthusiastic about reports that the next round of trade negotiations between Washington and Beijing was a positive one and culminated in an interim agreement. However, soon euphoria gave way to cautious optimism, since the parties are still far from concluding a final agreement.
China pledged to increase purchases of agricultural products from the United States to $50 billion. This is almost 2.5 times more than before the trade conflict between the two largest economies in the world. In turn, the White House has not yet begun to raise tariffs from 25% to 30% on Chinese goods worth $250 billion.
Although Donald Trump failed to accelerate the US economy to the promised 3%, he is quite capable of improving the state of US foreign trade. The country's deficit in trade with China is gradually decreasing, and the growth of agricultural exports from the United States to China will only contribute to this. At the same time, about $360 billion of Chinese imports are still under US duties. Washington does not say anything about the cancellation of the planned increase in tariffs for goods from China worth $160 billion planned for December 15, as well as about the extension of the grace period for American sellers of components for the Chinese technological giant Huawei.
However, Beijing managed to gain time. It will take at least several weeks to bring to mind the interim agreement signed in October. Focus will then shift to the meeting between Donald Trump and Xi Jinping on the sidelines of the APEC summit in Chile (November 16-17). And there and before the presidential elections of 2020 in the United States at hand. If they are won by a representative of the Democrats, then China's position could seriously change.
Considering that Washington and Beijing concluded a truce in the trade war, there have been some shifts in the negotiations between Britain and the EU regarding Brexit, and the Fed announced the purchase of treasury bills by $60 billion per month until the end of the second quarter of next year to increase the balance, it would seem bulls on EUR/USD had to easily overcome the resistance levels at 1.1045 and 1.1065. However, this did not happen, which primarily indicates the internal weakness of the single European currency. Tomorrow, the IMF may publish disappointing forecasts for global GDP, and at the end of the week, China with upset weak data on the country's economic growth in the third quarter. In this case, the demand for defensive assets will increase, which will create serious difficulties for the continuation of the main currency pair's upward movement. Support for the "bulls" on EUR/USD can have positive news on Brexit and the disappointing release on US retail sales for September.
GBP/USD was unable to develop last week's active growth and plunged to 1.2550 from the highest levels reached on Friday since late June.
As it turned out, it's too early to rejoice at the successful completion of Brexit. Even if the UK Prime Minister Boris Johnson manages to agree on the conditions for the country to leave the alliance with the EU, the deal will still have to be approved by the local Parliament. Recall that the last four times rejected the "divorce" agreement proposed by the previous head of the British Cabinet Theresa May. Negotiations between Great Britain and Ireland have not yet ended. In addition, a summit of the European Council on Brexit will be held this week on Thursday and Friday. Each of these steps can slow down the process of concluding an agreement between London and Brussels or even become an insurmountable obstacle in its path. In this case, the EU can provide the UK with a new deferral of Brexit until the summer of 2020.
While some analysts believe that the above difficulties can cause the pound to fall to $1.22, others expect it to strengthen to $1.28, believing that a major breakthrough in the Brexit negotiations, not to mention the signing of the agreement, will lead to pushing the British currency to cosmic heights.
