Demand for defensive assets rose sharply on Tuesday amid reports that the White House canceled a regular meeting with the Chinese delegation, at which the parties were to continue the search for a mutually acceptable solution on trade issues. The formal reason for canceling the meeting is disagreement over the regulation of rules in the field of intellectual property, but the essence of disagreement can lie much deeper.

The United States, within the framework of its usual strategy, is trying to increase pressure on China, artificially creating new points of tension, which then try to "sell" as a concession in the negotiations, and this is how you need to evaluate the message that the United States intends to officially demand the extradition of Huawei Finance Director Meng Wanzhou.

At the same time, China is well aware that the real goal of the United States is to slow down the growth of the Chinese economy, so even China's readiness to increase imports from the United States totaling more than $ 1 trillion to reduce the trade surplus is not enough. Markets regard the emerging situation as a sign of a new spiral of tension, which will lead to a further decline in stock markets and an increase in demand for defensive assets.

Eurozone

The ZEW business index for Germany rose from -17.5p to -15.0p in January, while a slight decrease was predicted. The growth of activity, however, cannot compensate for the negative assessment of the overall economic situation, which sharply decreased from 45.3p to 27.6p, which indicates growing investor pessimism.

The index of economic sentiment in the eurozone remained virtually unchanged, slightly moving up from -21.0p. to -20.9 p.

Tomorrow, before the ECB meeting, another benchmark will be released, PMI from Markit, but, apparently, we will not see significant deviations from the established trend for a slowdown. The economic situation in the eurozone looks negative, the ECB at tomorrow's meeting is likely to lower its economic growth forecast, and the only thing that supports the positive so far is the outlook for inflation, which is still stable.

In any case, one should not expect a rapid growth of the euro in the near future, even against the background of serious problems with the dollar. Prior to the ECB meeting, EUR / USD will trade in a range, support of 1.1330 / 40, a resistance of 1.1380 / 90, out of range is unlikely.

Great Britain

The pound has finally received support outside the political plane. The report on the labor market for the last 3 months to November, inclusive, turned out to be positive, exceeding forecasts in a number of parameters.

Unemployment fell from August-October from 4.1% to 4.0%, and this is the minimum level since 1975, the number of employed increased by 237 thousand and reached 75.8%, the average wage growth was kept at 3.3%, and taking into account bonuses even increased from 3.3% to 3.4%.

The latter parameter served as the main catalyst for the growth in demand for the pound since it indirectly indicates a possible increase in inflationary pressure, which will provide the Bank of England with more freedom in preparing to exit soft monetary policy. So far, the markets are oriented towards one rate increase per year, and this rate is unlikely to be higher, but maintaining a high level of growth in average wages is, in any event, a bullish factor for the pound.

There is less time before the re-voting in the British Parliament on Brexit, the complete lack of news supports the pound, since it hints at the high intensity of backstage talks. The nearest 1/2970/80 resistance can be passed today, GBP / USD will tend to the 1.3050 / 70 zone, only an unexpected negative insider can change the mood, the probability of occurrence of which cannot be predicted.