Euro Under Pressure Over Deflation
EUR/USD was showing limited movement on Friday’s forex exchange market. In the European session, the pair was trading at 1.1722, up 0.13% on the day. The EUR/USD pair was down 0.90%, erasing the previous week’s gains.
Inflation levels remain weak in the eurozone. September shows an annual inflation rate of -0.3%, lower than the -0.2% read in August. Moreover, core CPI slowed to a rate of 0.2% year-on-year in September, down from 0.4% in August.
Weighing heavily on inflation levels was the severe economic downturn due to Covid-19 combined with the high value of the euro.
For policymakers, the continuing spectre of deflation remains a serious headache, but the negative trend could continue for some time. ECB President Christine Lagarde acknowledged in September that inflation forecasts to remain negative over the coming months.
Euro: Brexit Tensions Worsen
European leaders met in Brussels and presented a united front against the UK on Thursday. The Brexit negotiations have faltered badly.
French President Macron has said that a deal will not be made at any price. Furthermore, he warned that France prepared for a no-deal scenario.
German Chancellor Merkel echoed President Macron’s sentiments. The Europeans are insisting that the UK be more flexible, but the British government is rejecting the idea.
David Frost, UK’s chief negotiator, said he was disappointed with the summit. He was dismayed with the lack of flexibility by the EU in the Brexit talks.
Albeit the negotiations will continue next week, there is an absence of optimism around the talks. The air of pessimism was caused by both sides continuing to blame the other for holding up an agreement.
As per readings, there is weak resistance at 1.1748 with the next resistance line at 1.1787. There is support at 1.1679, followed by a support line at 1.1649. Moreover, the 50-day MA is slightly above the pair.
GBP/USD Exchange Rate Fails to Hold onto Optimism
Meanwhile in forex news, speculation over the UK-EU trade deal is fueling Pound US Dollar (GBP/USD) exchange rate volatility.
The Pound Sterling to US Dollar (GBP/USD) received some help from investors’ aspirations.
Helping to push it up in the FX market were hopes that the UK and EU could continue trade talks.
UK foreign secretary Dominic Raab said that the two sides are close to a deal. In fact, this encouraged hopes that Prime Minister Boris Johnson would not choose to walk away from discussions.
The Pound Sterling (GBP) had a solid boost against its rivals, reversing some of Thursday’s losses.
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