Although the European currency yesterday was trading fairly volatile in tandem with the US dollar, the trading instrument failed to get out of the side range.
Italy fights back
The news that the European Commission rejected the Italian budget plan for 2019 did not hurt the European currency much, as it seems that many traders expected this outcome. Now, according to EU rules, Italy has three weeks to prepare a new version of the budget.
If Italy leaves the budget plan unchanged, the conflict between the authorities and the European Commission may reach a critical point by the end of this year, when the European Central Bank will have to decide to terminate the bond purchase program. Such a decision will play a key role in reducing Italy's loan-servicing costs.
The British pound also tried to strengthen against the US dollar, but it all ended in failure. Yesterday, there was news that the EU could make a proposal to Prime Minister Theresa May on the participation of Great Britain in the customs union. The uniqueness of this proposal is that the subject of a separate agreement will be a problem with the Irish border, because of which the parties cannot agree. In other words, the main trade agreement can be concluded without this clause, which will be taken out of the framework and the discussion on which will be further conducted separately.
Despite this, the pound did not continue its upward correction, and by the end of the day, it returned to the area of major support levels.
US President Donald Trump once again spoke out against the current chairman of the Federal Reserve System and intensified attacks on him. This is stated in an interview with the WSJ. Trump said that every time we do something beautiful, Powell raises interest rates. In his opinion, the Fed represents the greatest risk to the US economy, as interest rates rise too quickly.
The data released yesterday afternoon did not have a strong effect on the quotes of the American dollar.
According to the report, the manufacturing activity index in the area of responsibility of the Federal Reserve Bank of Richmond decreased in October. According to the Fed-Richmond, the composite production index fell to 15 points in October against 29 points in September, while economists had expected the index to be 24 points.
The preliminary index of consumer confidence in the eurozone rose slightly in October and amounted to -2.7 points against -2.9 in September of this year.
The speech of the representative of the Federal Reserve Bostic did not affect the volatility of EUR . USD. Bostic said that the Fed will continue to gradually increase interest rates, as the economy is strong, but the risks are biased towards growth. In his opinion, the Fed's policy still has a stimulating effect on the economy, but the committee is separated from the level of neutral interest rates by only a few increases.
As for the technical picture of EUR / USD, it is quite possible that in the next few days the volatility will remain low before the meeting of the European Central Bank, where rates are likely to remain unchanged, as is the policy for the bond purchase program.
In the event of a decline in the euro, support will be provided by the lower limit in the region of 1.1450, while a large resistance level is seen at the maximum in the region of 1.1495.
The material has been provided by InstaForex Company - www.instaforex.com