Euro and dollar are waiting for tests in the last week of autumn


This year, the loss of the euro against the dollar amounted to a significant 5.5%. The positions of the "bulls" in the main pair while breaking as fast as a house of cards. Even the conciliatory comments of the vice-premier of Italy Salvini could not cheer up the euro. Recall, the official said, to the figure of 2.4%, no one is tied. You can take as a basis of 2.2% or 2.6%, the main thing is that the budget deficit should ensure the necessary growth of GDP.

The current week will test the strength of the dollar and the euro. The US currency risks falling out of favor because of a possible deterioration in the second estimate of US GDP in the third quarter. In addition, the Fed may signal a slowdown in the cycle of normalization of monetary policy in the minutes of the last FOMC meeting. Negative for the euro, extremely weak inflation in the region in November and the escalation of the trade conflict between the United States and China at the summit of the G-20 in Buenos Aires. While bears rule, the euro / dollar quotes remain below 1.14.


Next year, the depleted euro will go on the amendment, but not immediately, experts predict. At the very beginning of the year, the exchange rate is likely to decline against the dollar. Euro currency, showing the weakest dynamics in the last three years, will be encouraged by the weakness of the dollar, which will lose a powerful support factor in the form of a strong economy. The accelerated development of the American economy will stop due to the end of the influence of the fiscal measures of the Donald Trump administration and the tightening of the Fed policy.

The single currency paired with the dollar may fall in price in the first quarter to 1.11, which is 2.2% lower than current levels. Then the course will be restored and at the end, the year will break through the mark of 1.18. This forecast is given by JPMorgan experts.

In addition to the expected slowdown in the US, the single European currency, according to analysts, should receive impetus from the increasing prospects for increasing the interest rates of the ECB in late 2019.

"In the spring, the euro should put an end to the breaking of the trend and start growing as the focus will shift to the policy of the ECB. The most significant change in 2019 will be the completion of the US economic lead-in period," says the JPMorgan review.

Fed officials expect to raise rates 4 times next year, plus another policy tightening at the December meeting. Thus, in a year, the rates will shift to the territory, where they will hold back the development of the economy. The members of the European regulator promised to keep the cost of borrowed funds at a record minimum until 2019.

Given that the ECB will raise interest rates once or twice in the new year, the choice of investors is likely to fall on the lender's currency, rather than the debtor, at the end of the business cycle. Therefore, the euro will exceed the dollar. The current account surplus is expected to be within 3.1% of GDP in 2019, and the US deficit will reach 2.6% of GDP. A surplus means that the region will be less vulnerable to capital outflows in the next recession.

The material has been provided by InstaForex Company -