The trade dispute between the United States and China does not yet show any signs of a possible completion in any foreseeable future. On Tuesday, stock markets reacted with a rise in response to the Trump administration's intention to issue Huawei a temporary work permit until August 19, which is likely to be the deadline for finding an acceptable solution.
China has not yet activated its asymmetric response mechanisms, which gives hope that a full-fledged war can be avoided, but China has such answers.
Today, the FOMC meeting minutes will be published, as the markets focus will be on the Fed's neutral position on the rate in the coming months, particularly on the issue of excess reserves of commercial banks and prospects for further balance reduction.
The dollar looks like a favorite against most currencies on Wednesday morning but weak volatility is unlikely to allow it to show a strong movement.
EUR/USD pair
According to the European Commission, the level of consumer confidence rose slightly from -7.3p to -6.5p in May. Despite the fact that the indicator is in the negative zone, it is still above the long-term average, while in the last 3 months stabilization is visible after a prolonged fall in 2018.
The euro still manages to stay above the April low of 1.1109 but the chances of a turn up are still weak. There is no reason or the ECB to curtail the incentive program while market expectations exclude any steps in this direction until the end of 2020.
Today, there is no strong news in the euro area. The main reference points will be on the speech of Draghi, which will be held at the farewell event on the departure of the ECB chief economist Peter Praet. On Thursday, reports from Markit and Ifo in the eurozone are expected, which can bring the euro out of sleep. While it is necessary to assume that EUR/USD pair remains under pressure, the nearest support of 1.1141 and 1.1134 will be passed in the coming hours with a high probability directed towards 1.1109 with serious intent to leave below.
GBP / USD pair
The volume of industrial orders in the UK fell to -10p in May, which is the minimum since October 2016. Perhaps, this is the response of the industry to the Brexit question. The period of uncertainty has been extended until October and the return of investment to the industry is postponed. Enterprises are forced to accumulate significant funds and resources in case of emergencies, which hinders the growth of jobs and investment in new industries. According to the CBI, the uncertainty should be removed as a matter of urgency.
Another attempt to break the deadlock was proposed by Theresa May, who intends to submit to the House of Commons another bill on the UK leaving the EU. If the government project is approved by the Parliament, it will be possible to hold a second referendum. Be that as it may, political tensions will continue at least until June when a vote will be taken in parliament.
Elections to the European Parliament will start today in the UK, which could turn into a serious defeat for the conservatives that could increase the pressure on May in favor of her resignation.
The pound continues to be under pressure because it can not rely on any political or economic factors. Inflation expectations are currently at the lowest level since March 2016, and the Bank of England has no reason to hint at possible normalization of monetary policy.
The GBP/USD pair has come close to annual lows and support at 1.2650/60 and a break below this level is possible. Today, data on inflation in April will be published. if they turn out to be worse than expected, the current momentum will allow it to go lower and the pound does not have serious support up to 1.2429.
The material has been provided by InstaForex Company - www.instaforex.com