The European currency is traded in a narrow side channel paired with the US dollar, as many market participants are waiting for what will end the story of Italy and its budget for 2019. Let me remind you that before the end of this day, the Italian government should make significant changes to the updated version of the budget, which will then be submitted to the European Commission for approval.
However, most economists doubt that any changes will be made, which can significantly complicate the "life" of the European Union and the European Commission. In turn, this will affect the growth prospects of the European currency. The short-term preconditions for a decline in the euro are hardly possible, since the market has already taken into account Italy's refusal to make any changes in the planned budget deficit for the next year.
In turn, the European Commission will continue to maintain a tough stance towards Italy, so as not to allow any other countries to "sow" inside the eurozone about the need to comply with EU rules. Most likely, the European Commission will recommend to apply in relation to Italy the procedure of excessive deficit, which will only exacerbate internal political problems.
While there is an active struggle on the "one front", on the other hand, there remain significant problems with Brexit, which limit the upward potential of the British pound. Negotiators from the European Union and the UK did not come to the conclusion of at least a preliminary agreement, which only aggravates the situation and pushes the option of an increasingly disorderly Brexit forward.
Negotiations will be held until Wednesday evening, but many economists and experts do not see a possible scenario for reaching an agreement in the near future.
It is also necessary to note the beginning of the next round of talks between US Treasury Secretary Steven Mnuchin and Chinese Vice Premier Liu He. This is a deal that will be able to ease the tension of trade relations between the two countries. The parties are trying to make the meeting of the heads of China and the United States as comfortable as possible, scheduled for the end of November this year.
As for the fundamental statistics, published in the first half of the day, then attention should be paid to the report on the consumer price index in Germany, which in October reached its highest level in the last five years.
According to the Federal Statistics Bureau of Germany Destatis, the final CPI of Germany in October this year rose by 0.2% compared with the previous month, which fully coincided with the forecasts of economists. Compared to the same period of 2017, the index increased by 2.5%.
The report indicates that inflation growth is directly related to the acceleration of energy prices, which jumped 8.9% in October compared to the same period of the previous year.
Excluding energy prices, inflation in Germany in October was 1.7%.
Expectations for the economy in Germany rose slightly in November of this year. Despite this, a larger increase in activity in the short term is not predicted. According to the ZEW Research Institute, the index of economic expectations in Germany in November of this year rose to -24.1 points from -24.7 points in October. The institute believes that the main problems are concentrated in the sector of industrial production and retail sales, which will adversely affect the German economy in the 3rd quarter of this year. The current conditions index ZEW in November fell to 58.2 points.
Data from the National Federation of NFIB pointed to the growth of optimism of small business participants in the United States. According to the report, the index of small business optimism in October 2018, reaching 107.4 points after updating the August maximum around 108.8 points. Economists had forecast an index value of 107.9 points.
The British pound rose slightly after the report, which, although it did not meet the expectations of economists, turned out to be better than last month. According to the ILO, claims for unemployment benefits in the UK in October this year increased by 20,000, while the unemployment rate itself was 2.7%. The number of unemployed in the UK from July to September of this year increased by 21,000, and the unemployment rate was 4.1%.
The average earnings in the UK for the same period increased by 3.2% after rising by 3.1%, which turned out to be better than economists' forecasts.
