Due to the influence of a large number of news factors, EUR / USD session was very volatile on Wednesday, and the trading was closed with a small bullish gain.
At the beginning of the trading day, bulls didn’t have many reasons for joy, since the statistics published in Europe mostly either corresponded to the predicted values or was even worse. Key data on the preliminary estimate of EU GDP for the third quarter fully coincided with forecasts and previous values, growth y / y 1.7%, q / q 0.2%.
A serious increase in volatility occurred at the beginning of the American trading session, when, firstly, data on consumer price dynamics was published in the United States, and the UK began a government meeting at which a draft Brexit agreement agreed with the EU was considered.
These statistics from the United States somewhat upset investors, which led to a weakening of the dollar. In general, the statistical indicators corresponded to the predicted values, with the exception of the base CPI indicator y / y, which in October decreased from 2.2% to 2.1%. Inflation rates are traditionally important indicators of decision-making on changes in interest rates, so experts believe that while maintaining the current level of inflationary pressure, the Fed is unlikely to accelerate the process of raising interest rates. At the same time, the likelihood of a change in the rate at the December meeting, according to the CME Group, is still estimated at levels close to 70%.
The main driver of volatility at the end of the trading day was the news from London where Teresa May managed to convince the government to adopt a plan for leaving the UK from the EU, which had previously been agreed with the European side. These messages provided sufficient support to both the pound sterling and the European currency.
Today, EUR / USD currency pair is trading at a moderate growth of 0.3% playing out positive news about serious progress in the implementation of the Brexit agreement. But the dollar's position is still quite strong. This morning, Jerome Powell spoke at one of the events in the US, who prepared traders for the fact that further increases in interest rates should be expected at any FOMC meeting. Powell noted that the US economy continues to grow at a good pace and expressed the hope that this positive dynamic will continue. Inflationary pressure also meets the expectations of the Fed, which is also a good basis for further normalization of interest rates in the country. Separately, Powell touched on the White House policy. In particular, he noted that the current protectionist policy does not yet have a strong impact on the economy, but its further tightening may lead to negative consequences. Further implementation of the policy of raising rates in the US will inevitably contribute to further strengthening of the dollar, which will be a strong factor of pressure on the EUR / USD pair in the long term.
In addition to news from London, economic data from the United States will also have an impact on the trade, where retail sales reports and data from the Federal Reserve Bank of Philadelphia will be presented today. In Europe, only data on the trade balance and speeches by representatives of the ECB Pra and Kere are worthy of certain attention.