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EUR/USD: "Allies in trade are not our allies"

02/13/2018
at 8:35 AM

With the opening of today's trading day, futures for US stock indexes are falling again after some recovery during the previous two trading days. The dollar also is declining behind the indices. The dollar index DXY, reflecting its value against the basket of 6 other currencies, broke through the psychological level of 90.00 and fell to the level of 89.75 at the beginning of the European session. Probably, the reason for resuming the decline in the indices and the dollar was another decrease in the Japanese stock index Nikkey225 and the yen's rise against the dollar. At the end of the Asian session, the Nikkei225 index closed with a decrease of 0.6%, at a minimum level for four months, near the mark of 21215.00. During the European session, the Nikkey225 index continues to decline.

Most likely, market participants buy the yen as a safe haven on the eve of the publication of important economic data on Wednesday, including a report on Japan's GDP and US inflation data.

It is also possible that some investors were alarmed by the statement of US President Donald Trump, made on Monday that some countries receive unilateral benefits from trade with the United States. Trump said that this week he will announce plans to introduce a so-called "counter tax" on exports from these countries. "We are going to collect fees from other countries, from countries that benefit from the United States", Trump said at a meeting with the regional leaders. "Some of them are called allies, but they are not allies to us in trade". "We will receive large amounts in the form of a counter tax, and you will hear about it this week and in the coming months", Trump added. It seems that the protectionism of the US president's administration regarding international trade is not at all an empty phrase, and trade wars have not brought long-term benefits to anyone yet.

Trump, as usual, contradicts himself. At the recent World Economic Forum in Davos, Donald Trump announced his intention to build mutually beneficial trade cooperation with the whole world, and Washington is ready to conclude bilateral trade agreements to create a trade system that would work not only for the US, but also for all over the world.

Meanwhile, at the beginning of the European session there is a low volatility. Probably, investors are waiting for the release at 09:30 (GMT) of the block of inflation indices in the UK, among them - retail price indices, producer price indices, consumer price indices for January. Some decline in the growth rates of the indices is expected, although inflation is still much higher than the target level of 2.0%. According to forecasts, the consumer price index (CPI) in January fell by -0,6% and amounted to 2,9% in annual terms (against + 3,0% in December). The CPI is the key indicator of inflation, which in the UK has grown significantly following the Brexit referendum held in the summer of 2016, undermining the purchasing power of the GBP.