Trade agreement issues in the US and China have a negative impact on markets. Demand for risky assets sharply slowed following news that the signing of the "first phase" of the trade agreement could be disrupted due to a lack of compromise on both sides.
Let me remind you that they still can't agree on key issues. First of all, we are talking about the abolition of trade duties, which Beijing insists on. The White House administration is demanding an increase in China's purchases of US agricultural products. Many have already managed to forget the statements of the presidential administration on October 11 that the parties reached an agreement in principle on these issues.
As I noted in my morning review, as a result of this, the American leader made a number of statements yesterday that inspired pessimism in further progress and expectations. US President Donald Trump said he was very pleased with the course of trade negotiations with China, but did not disclose any details about the deal. There is no information regarding when exactly the first stage of the agreement will be signed. At the same time, Trump announced that he was ready to increase import duties if a trade agreement is not reached. Let me remind you that the parties refused to introduce new duties in December following news that the first stage of the agreement could be signed in the near future.
Trump also said that China will have to conclude a deal that suits the United States. Duties will increase again if the deal is not concluded in the near future. Of course, there will be no talk about any December cancellation. Let me remind you that in October of this year, Trump proposed a scheme that includes large purchases of US agricultural products by China and a currency agreement in exchange for easing duties, which Beijing is clearly not happy with.
The data released today in the morning on inflation in Germany drove the euro even further down. According to the report, the German producer price index fell by 0.2% in October this year after a slight increase of 0.1% in September. Compared to the same period in 2018, prices fell immediately by 0.6%. Economists predicted that in October, prices will remain unchanged and fall by only 0.4% compared with 2018. Weak inflation rates remain a key problem for the European Central Bank, which this summer further lowered its negative deposit rate and launched an asset buyback program, which began operating this month.
This afternoon, the focus will be shifted to the October minutes of the Federal Reserve, where they decided to lower the key rate by a quarter percentage point to the range of 1.5% -1.75%. This was done for the third time this year. From today's minutes, traders want to get a guide on how the central bank will continue to operate and whether the bar will change to further ease monetary policy at the meeting scheduled for December 10-11.
Let me remind you that in October, eight members of the Open Market Committee voted in favor of the rate cut. Two were against it. Judging by the statements made by the Fed representatives last week, many expect a pause in the cycle of easing monetary policy, but after a recent meeting between the US president and the Fed chairman, the likelihood of lowering rates has increased significantly.
As for the technical picture of the EURUSD pair, the market is now on the side of sellers of risky assets. However, the bullish scenario can still be realized only after it is possible to overcome a high of 1.1090. This will continue the upward correction to the area of highs 1.1110 and 1.1140. However, one should not exclude the possibility of a downward correction, since a break of intermediate support at 1.1050, which is currently approaching the trading instrument, may push the pair to the lower boundary of the upward channel in the area of 1.1020.
