The European currency froze during the key "fight" between the US president and the head of the European Commission. Jean-Claude Juncker continue to have a visit at Washington, where he will held talks with Donald Trump on July 25. On the eve of this meeting, representatives of the American and European sides exchanged harsh statements that made traders nervous on both sides of the ocean.
Last month, Juncker's potential visit to the US was in question, as Brussels doubted the expediency of this event. Doubts have not disappeared and now, Trump voices his demands by means of ultimatums. He is preparing to impose 20% duties on cars and auto parts imported from the EU countries, if the alliance does not reduce or eliminate trade barriers against US companies. The impact may affect the automotive industry in Germany, France and Italy based on preliminary calculations, and the total value of the designated fees is $ 300 billion. Then, there will be a "domino effect", as the eurozone business climate will deteriorate significantly, thereby slowing the growth of key indicators and the economy as a whole.
At the end of June, during the EU summit, Mario Draghi warned European leaders about the catastrophic consequences of a full-fledged trade war with the States. Apparently, the apocalyptic scenario voiced by the ECB head had a corresponding effect since earlier in July, the White House was visited by the Prime Minister of the Netherlands (who called Trump to find a compromise solution), after which the German chancellor allowed a reduction in duties on American cars and even expressed willingness to support such an initiative, "if such a question is raised at the EU level".
However, the overall situation somewhat worsened on the eve of the European Commission head's visit. Angela Merkel criticized the actions of the White House because of the publication of a new list of Chinese goods, which can be taxed with 10 percent duties. She stated that US actions are contrary to WTO rules and are devastating for the world economy. German Foreign Minister Heiko Maas commented on Juncker's visit to Washington,and he said that Europe will not negotiate "with a gun at his temple" and will not agree to a disadvantageous proposal. Here, it is worth noting that Maas is a member of the SPD, which is part of the coalition with the CDU / CSU, but at the same time is a "temporary ally" of Merkel. Therefore, the position of the Minister for Foreign Affairs should not be identified with the position of the Chancellor.
However, Brussels is still quiet about its intentions. While the official speaker of the European Commission Margaritis Shinas informed yesterday that Junker will arrive to the White house "without any specific trade proposal". According to him, the head of the EC plans to agree on further negotiations with the American side in order to regulate trade issues.
But, according to a number of experts, Junker will still announce Trump's possible compromise. It consists in the conclusion of an expanded multilateral treaty between the US, the EU and some other auto-exporting countries. Nevertheless, this is a very large-scale project which can take a long time to implement. Impulsive Trump will certainly reject this proposal and in fact, in his opinion, the European Union has long occupied an unfair and tough trade position against the United States. Therefore, it is unlikely that he will agree to the conclusion of any multilateral agreements.
However, the above option is just one of the alleged scenarios of the speech. The concessions that are ready to go to Europe is in fact (not to follow the "Chinese way") unknown to anyone. That is why the intrigue of tomorrow's meeting puts pressure on the traders of the EUR/USD pair, showing too large stakes on the investment during the July meeting of the ECB. All other fundamental factors have receded into the background. For example, today's release of European PMI indices in the manufacturing and service sectors was ignored by the market. The pair symbolically increased by several tens of points, but almost immediately returned to its original positions.
The embarrassed emotions and the loud statements of Trump towards the actions of the Fed. Members of the American regulator now observe a "silence regime", which will last until the end of July, which extends until the next Fed meeting. Perhaps, the dollar index stopped its decline because of the lack of a response from the Fed. If at the July meeting the regulator's members ignore the odious statement of the US president, this situation will "come to naught", after the market continue to discuss the possibility of a double rate hike within this year.
