EUR/USD Stabilizes, Albeit At Low Ground

  • EUR/USD is getting comfortable on the lower ground but seems to stabilize. 
  • Optimism about trade meets fears about Italy and Brexit.
  • The technical picture is getting worse, with the double-bottom serving as the key.

EUR/USD is trading above 1.1300, stable on the day but at the bottom of the recent range. Markets are more optimistic on Wednesday as China is reportedly set to buy US soybeans and lower car tariffs. Moreover, the release on bail of Huawei CFO Meng in Vancouver, Canada, also helps alleviate tensions.

In the old continent, the negotiations between Italy and the European Union reach a climax as Italian PM Giuseppe Conte meets European Commission President Jean-Claude Juncker. Both sides are striving to agree on Italy’s budget for 2019, and especially on the deficit. A figure of around 2% is reported, but details are yet to be sorted out.

France, the second-largest economy, may also find itself at loggerheads with the EC over the budget. President Emmanuel Macron is responding to the widespread protest of the “Gilets Jaunes” movement and aims to increase fiscal spending.

In Germany, the ZEW survey showed improving future expectations but deteriorating economic conditions at the present. The strength of the European economy will be in the limelight at the all-important European Central Bank meeting on Thursday.

Brexit continues having an influence on the Euro. UK PM Theresa May faces a leadership challenge later in the day amid growing frustration around Brexit. There is some speculation that Article 50 will be delayed if she loses.

The primary economic indicator today is the US inflation report for November. Headline Consumer Price Index is projected to rise by 2.2% YoY. More importantly, Core CPI carries expectations of the same figure, which would be an acceleration from the disappointing 2.1% level that was reported in October. The data is closely watched by the Fed, which makes its rate decision next week.

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