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The markets, in calm; the pound, waiting for inflation data

The markets, in calm; the pound, waiting for inflation data


The cautious tone persists in the currency markets, before the signing of the long-awaited trade agreement between the United States and China.

At 10:25 (CET), the yen, considered a safe haven, rises slightly against the dollar, placing the USD/JPY at the level of 109.91, leaving 0.1%, while the euro drops by little against the dollar, reaching the EUR/USD pair at $ 1.1120, with a 0.1% decline. The preliminary 2019 reading of Germany’s GDP published at 11:00 a.m. (CET) could have some impact on that pair.

The formal agreement aims to put an end to 18 months of tariff rifirrafes that have ballasted world growth, but will not end the trade dispute between the two largest economies in the world. This became clear during the night when US Treasury Secretary Steven Mnuchin said that existing tariffs on Chinese products would remain as they are, pending further talks.

On the other hand, the pound has returned to rise above the level of 1.30 dollars, driven by the statements of Prime Minister Boris Johnson, who said late Tuesday that he considers it “very likely” for the United Kingdom to get a “comprehensive trade agreement with the EU before the end of the year”.

It is debatable how long this pair can remain above this level in view of the recent statements of several members of the Monetary Policy Committee of the Bank of England, suggesting that the bank may be leaning towards a rate cut. Michael Saunders, a member of the Bank of England committee could join the growing chorus of voices asking for a cut in his speech on Tuesday.

“The news that the Bank of England has become a bit more cautious, in addition to the fact that there is no evidence of a serious slowdown in the United States, indicates that the GBP/USD could spend more time at the lower end of its range of negotiation between 1.29 and 1.35 “, according to an ING research note (AS: INGA ).

The inflation data published this Wednesday at 11:30 a.m. (CET) could have some impact. Everything indicates that the general inflation of the CPI in December will have reached + 0.2%, while the annualized figure will remain stable at + 1.5%.

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