EUR: Rumors about a change in the budget of Italy did not help the euro much. Trump returned to the issue of trade relations

The euphoria about the rumors that the government of Italy is discussing the option of reducing the target budget quickly disappeared and the euro ended yesterday at the European session, resulted in profit taking and then a new downward wave in risky assets.

American President Donald Trump also added problems, who in an interview stated that he intends to increase duties on Chinese goods worth more than $ 200 billion to 25%. Trump also noted that he would no longer listen to Beijing's request to refrain from such an increase.

Such statements a few days before the meeting with the Chinese leader forced many investors to reconsider their hopes related to the possibility of concluding a trade agreement, or with the suspension of this agreement for a "pause", as was the case with the European Union.

Trump said that if he does not agree with China, he will add another $ 267 billion in fees, which means that goods for that amount will be subject to duties of 10% or 25%.

As I noted above, the euro rose slightly yesterday on reports that the Italian government is discussing the possibility of reducing the target budget deficit for 2019 from 2.4% to 2% -2.1% of GDP. However, these messages only reduced the growth of the yield of Italian government bonds but did not lead to significant changes in the Forex market.

A number of experts note that even if Italy comes to its senses and changes the budget deficit for 2019, this will not regain lost confidence of investors and European partners, which will negatively affect the further development of the economy and trade relations.

Yesterday's sentiment data in German companies had a negative impact on the market. As indicated in the report of the Institute Ifo, the business climate index dropped to 102.0 points in November from 102.9 points in October, while economists had expected the index to be 102.3 points in November.

The speech of the European Central Bank President Mario Draghi was ignored by the market. On the one hand, this is good, but on the other hand, a number of questions concerning measures in the event of a more serious slowdown in economic growth in the eurozone, remained unanswered. Draghi once again signaled that the Central Bank will begin to curtail in December the asset purchase program, amounting to 2.6 trillion euros. He also noted that his concerns about the recent slowdown in the eurozone economy have declined. In his opinion, the slowdown in economic growth is temporary.

The ECB Governor expects the incoming data to confirm the mid-term forecasts of economists made on inflation, which will confirm the correctness of the decision to complete the purchase of assets in December 2018.

In the afternoon, US data contributed to the strengthening of the US dollar.

According to the report, the Chicago national activity index in October 2018 increased compared with the previous month due to an improvement in the employment situation. Thus, the national activity index in October was 0.24 points versus 0.14 points in September.

But the total business activity in the area of responsibility of the Federal Reserve Bank of Dallas in November was below forecasts.

According to the data, the Fed-Dallas business activity index in November 2018 was 17.6 points while economists had expected the index to be 25 points in November.

As for the technical picture of the EURUSD pair, it is likely that the breakdown of support for 1.1325 will lead to the resumption of the downward trend with the renewal of the 1.1290 and 1.1260 minimums. However, the larger target for bears is the lows of 1.1220 and 1.1180.