26.01.201808:27 Forex Analysis & Reviews: Trump and Powell clean feathers on combat headgear

EUR / USD, GBP / USD pair

Yesterday, investors started with preparations for the ECB meeting and closed their positions to fix their profits which were noticeable on the increased volumes of trading. The GfK German consumer climate index rose from 10.8 to 11.0 in February and the German business sentiment index grew from 117.2 to 117.6 in January, which was created by a convenient background for fixing profits against the purchases of some players. In the UK, the balance of retail sales from CBI fell from 20 to 12 for the current month, which was created some difficulty for the pound to grow later.

Mario Draghi's speech was the main event of the day. As expected, the head of the ECB did not assess the current euro exchange rate, formally declaring the volatility of the exchange rate as an uncertainty factor, underscoring the Central Bank's detachment from the impact on the pricing of the euro. After which, he devoted much time to positive economic growth and prospects. He noted the need for structural reforms and the uncertainty in assessing inflation. Mario Draghi did not confirm the expected thesis about the sooner completion of QE. Nevertheless, investors saw in this speech "green light" purchases.

Data on sales of new homes in the U.S. came out worse than forecasted as it dropped from 689,000 to 625,000 in December, which was then revised to a decrease from 733,000. The forecast assumed a decrease to 679,000. The monthly decrease in sales decreased by 9.3%. The data supported the growth of counter-dollar currencies. The number of initial applications for unemployment benefits rose over the week from 216,000 to 233,000.

But the weakening of the dollar was stopped not just by anyone, but by Donald Trump himself, who is always talking about the decrease in the dollar. Suddenly, he stated that a strong dollar should be accompanied by a strong dollar. After that, Minister of Finance Mnuchin changed his view of the dollar, saying that the United States is indifferent to the short-term fluctuations of its rate, but in the long term, the dollar will grow stronger.

Early last year, we noted that President Trump incorrectly correlates the strong US economy with the weak dollar, and now he has corrected this mistake. But he did it spontaneously, even the Minister of Finance did not know about it. Thus, the White House still has to work out a more concrete monetary plan and coordinate it with financial institutions. It will take time, but probably not before the time when Jerome Powell takes over as head of the Fed on February 3, and the euro can still reach new highs. It is noteworthy that the Senate approved Powell for the 23rd-day post, after which Trump introduced a new estimate of the national currency. As a result, the euro surged due to the comments of Mario Draghi by 130 points and closed the day by 15 points lower.

Today, the main news will be a block of economic data for the United States. GDP for the 4th quarter is expected to be at 3.0% compared to 3.2% in the third quarter. Bloomberg agency shows a consensus forecast of 2.9% but makes a reservation for a larger increase due to increased consumer spending growth of 3.6% versus 2.2% in the third quarter. Also, the Federal Reserve Bank of Atlanta assumes GDP growth of up to 3.4%. The volume of orders for durable goods (Durable Goods Orders) is expected to increase by 0.9% in December after 1.3% in the previous month. The Core Indicator of orders, Core Durable Goods Orders, is expected to grow by 0.5% against -0.1% earlier. The commodity trade balance is projected to increase from -70.0 billion dollars to -68.6 billion in December. Wholesale stocks may show growth by 0.2% -0.4% after 0.8% in November.

Investors' interest in risk with the performance of Trump can hardly be extinguished. We are waiting for the growth of the stock market and the target will be 1.2640 considering the growth of the euro. On the British pound, we are waiting for a return to the level of 1.4345 and further growth to 1.4500.

USD / JPY pair

The Japanese yen also did not stand aside from the bold statement of the American president. After a drop of 70 points, the day growth closed by 19 points. A moderately optimistic inflation indicators of Japan came out this morning. The basic CPI increased from 0.6% y / y to 1.0% y / y compared to the forecast that was slightly higher, 1.1% y / y. As expected, the overall CPI remained at 0.9% y / y. The base CPI in metropolitan Tokyo already declined from 0.8% y / y to 0.7% y / y in January, while the total Tokyo CPI rose from 1.0% y / y to 1.3% y / y. The index of prices for corporate services remained at the previous figure of 0.8% y / y. On the stock indices of the APR, only China A50 (0.75%) shows good growth, while other indices focused on the ambiguous closing of the US market (S & P500 + 0.06%, Nasdaq -0.05%), which are traded with caution. The Nikkei225 was 0.03% and the Kospi SEU was at 0.16%.

To date, the yen has returned to yesterday's closing level, similar to the movement of European currencies. Relatively, the Japanese yen is anticipated to decline in case of a further weakening of the dollar. We are waiting for the price in the range 108.40 / 70 and lower at 108.00. There is support for the yen and weakened data on the expenditure of households in the December assessment are published on Tuesday, with the forecasted value of -0.6% m / m compared to the previous rate of 2.1%. The retail sales also declined with the forecast value of 1.8% y/y versus 2.1% y/y in November.