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United States of America
The US dollar is weakening today against the pound, strengthening against the yen, and has an ambiguous dynamics with the euro.
Today, the dollar is trading under the influence of European data. Investors are also alarmed by the aggravation of the US-Saudi relations due to the disappearance of journalist Jamal Khashoggi. The US administration suspects that he was killed by the Saudis and is threatening the kingdom with sanctions. In response, the Saudi government is considering a number of retaliatory measures, including a reduction in oil production in order to raise its prices, refusal to sell oil for dollars, and refusal of further investment in the American economy. Generally, aggravation of relations with the most important partner in the Middle East puts pressure on the dollar.
Today, the euro is strengthening to the yen, weakening to the pound and has mixed dynamics with the US dollar.
The single currency is pressured by data on European and German ZEW Economic Sentiment. In October, the figures dropped again, and more dramatically than expected. It amounted -24.7 points for Germany and at -19.4 points for the Eurozone. Thus, the pessimism associated with the exacerbation of world trade conflicts continues to rise within European business circles.
On Wednesday, investors are waiting for the start of the next EU summit, on which Brexit issues would be discussed. The problem of the Irish border is still controversial. On Wednesday, data on European inflation will be published. It is expected that in September, the consumer price index will remain at 2.1%, and the basic consumer price index will grow from 0.9% to 1.0%.
GBP is strengthening today against its main competitors - EUR, USD, and JPY.
GBP is supported by positive data from the British labor market. August Unemployment Rate remained the same (4.0%), while Average Earnings growth exceeded forecasts: iAugust (3 m/yr), the indicator ex Bonus rose by 3.1%, which is a ten-year maximum. Average Earnings Index +Bonus increased by 2.7%. Thus, both indicators exceed the average inflation rate, which in August (3 m/yr) was 2.5%.
Investors wait for EU summit, where new Brexit decisions can be made. Currently, negotiations are at an impasse. EU chief negotiator Michelle Barnier said that a number of key issues, including the Irish border issue, are still not resolved. So, the risk of a British exit from the European Union without a deal remains high. On Wednesday, data on UK inflation in September will be published. The consumer price index is expected to increase from 2.7% to 2.8%, and the basic CPI may drop from 2.1% to 1.8%.
The Japanese yen is weakening today against its main competitors - the euro, the pound, and the US dollar.
In the absence of significant economic releases from Japan, the yen is trading under the influence of US and European news. Japanese investors continue to monitor trade negotiations with the United States. Currently, the country is seeking wide access of its automobiles and industrial goods to the American market in exchange for expanding imports of American agricultural products. As for the proposals of the US Treasury Secretary Steven Mnuchin to include the currency clause in a bilateral trade agreement, the Japanese Minister of Economy Toshimitsu Motegi said that so far there has been no such negotiations.
AUD today has mixed dynamics in pairs with the US dollar and the euro, weakens to the pound and strengthens against the yen.
On Tuesday, the minutes of the last meeting of the Reserve Bank of Australia were published but they did not disclose anything new to investors. RBA officials noted the acceleration of GDP due to an increase in investment in subsoil use and consumption growth, employment growth, and a decrease in unemployment. The current policy of the regulator will continue to support the Australian economy; there are no convincing arguments for raising interest rates.
During the day, oil prices are correcting down.
Investors are following the development of the US-Saudi conflict, which in the future could lead to a reduction in oil production by the kingdom and an increase in prices. By the end of the day, market participants are waiting for the publication of a weekly report on US oil reserves from the API. If the trend to increase them continues (the last time growth was 9.75 million barrels), then prices may be under pressure again.
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