US and China surprisingly left open the possibility of a summit meeting despite the controversial day of negotiations, during which Beijing outlined a number of requirements that US clearly do not intend to fulfill.

On Monday, Foreign Minister Wang Yi talked with Deputy Secretary of State Wendy Sherman to reaffirm Beijing's demands, which is that US stop criticizing China's political system, lift all sanctions and tariffs, and stay out of the affairs of Hong Kong, Taiwan and Xinjiang.

Senior officials from the Biden administration later told reporters that Sherman was focused on establishing trade accents in the US-China relationship, rather than negotiating specific issues.

Rumors are also circulating that at the upcoming G20 meeting, US President Joe Biden and Chinese President Xi Jinping will get together to break the deadlock on negotiations.

"The president still believes in personal diplomacy, and expects things to change for the better at some point," White House spokeswoman Jen Psaki said.

In any case, the parties will most likely hold several rounds of discussions before the official meeting in order to work out an exact agenda for the two leaders.

On a different note, euro dropped slightly yesterday amid a weaker-than-expected report on German business confidence, which occurred because of concerns over the highly-infectious delta strain of coronavirus. The Ifo Institute said the business climate index fell to 100.8 in July, from a revised 101.7 in June. Meanwhile, the index of current conditions rose to 100.4 points, from a revised 99.7 points. Business expectations also fell to 101.2 points.

Clearly, problems in supply are becoming more and more critical, not to mention many companies are having difficulties in finding skilled workers. Ifo said the latest data hints that recovery in Germany may lose some momentum, but GBP growth in the second and third quarters will remain excellent.

In the United States, another sharp drop in new home sales was recorded. The US Department of Commerce said the figure fell 6.6% to 676,000 in June, after falling 7.8% to 724,000 in May. The continued downturn surprised economists because they expected the data to rise 4.0% to 800,000. In any case, they project a modest growth in the second half of 2021, provided that production costs decline and price pressures ease.

With regards to EUR/USD a lot depends on 1.1830 because going above it will lead to a larger jump towards 1.1850 and 1.1880. But if the quote drops below the level, EUR/USD will plunge to 1.1780 and 1.1750.

GBP

Pound also declined yesterday, after MPC member Gertjan Vlieghe said the current monetary stimulus should continue for a long time. Vlieghe said there is no need to tighten policy yet because the jump in inflation is temporary, and price pressures will ease once supply shortages and underlying effects disappear. He also said UK has not yet escaped the grasp of COVID-19, so as soon as support measures are removed, the economy may suffer.

On Sunday, UK reported 29,173 new cases of coronavirus, which is significantly higher than the data last week. Prime Minister Boris Johnson said the impact of the lifting of restrictions remains to be seen, but expressed hope for the best.

Going back to pound, a lot depends on 1.3805 because going above it will result in a jump towards 1.3860 and 1.3900. But if the quote declines below the level, GBP/USD will collapse to 1.3770 and 1.3740.