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Euro resumed its rally on Monday evening, on which it successfully won back the losses it had earlier. Meanwhile, pound continued to decline, partly due to the surge in market volatility US President Joe Biden's statements caused.
Unsurprisingly, the statements also provoked a strong decline in oil prices, followed by a collapse in stocks. To add to that, the threat of another lockdown due to the rapidly spreading Delta strain of the coronavirus has added fuel to the fire, so investors rushed to buy long-term bonds and got rid of risky assets.
US Treasury Secretary Janet Yellen also expressed doubts on the preservation of last year's trade deal with China. This is the first clear statement by the Biden administration regarding the issue, detailing their opinion that the imposed duties have caused harm to American consumers and did not really solve the problems that exist between China and the United States.
The deal was supposed to end the devastating trade war between the two countries, but now, the US needs to make a choice: should they keep the deal? abandon it? or try to replace it with a new one?
As recent data have shown, eighteen months after the signing of the deal, both sides still continue to pay huge tariffs. Imports of many goods have not led to significant changes, not to mention neither side managed to gain much benefit. And while China has repeatedly said that the first phase of the agreement is good for both sides, the current relative calm on the trade front does not seem to bode well. The Biden administration is clearly committed to push changes in the treaty, where, most likely, they will act more decisively and aggressively towards China.
On a different note, President Biden had an interview yesterday, during which he supported the claims of the Federal Reserve that the observed surge in US inflation is temporary. Biden also said he respects the independence of the central bank and Fed Chairman Jerome Powell.
According to latest reports, consumer prices grew 5.4% over the past year, which is significantly higher than the target 2.0%. However, it is mostly caused by the sharp recovery of sectors that collapsed very strongly due to the pandemic.
And because of these high prices, coupled with supply shortages, homebuilder confidence in the US slipped to 11-month low this July. According to the National Association of Home Builders (NAHB), the index dropped to 80 points, from 81 points the previous month.
All this slightly jarred euro, but today a lot will depend on 1.1784 because going above it will result in a further increase towards 1.1806, 1.1825 and 1.1850. But a drop below the level will lead to EUR / USD collapsing to 1.1765 and 1.1740.
GBP
Pound continued to decline despite hints of future policy changes by the Bank of England. Apparently, investors are very much worried because of the increasing cases of coronavirus caused by the highly contagious delta strain. The number has already reached January highs, which suggests that the UK has not yet escaped the clutches of the virus. The latest report said new COVID-19 cases have increased to 54,000 on Monday, which is the highest rate since January 15.
In line with this, MPC member Jonathan Haskel said that now is the right time to tighten monetary policy, which further decreased demand for pound.
But for today, a lot will depend on 1.3660 because dropping below it will lead to a further drop towards 1.3635 and the base of the 36th figure. But if bullish traders manage to push GBP/USD up to the 37th figure, price could reach 1.3725.
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