Review of the foreign exchange market on 11/07/2018

Naturally, the uncertainty before the elections in the United States had a negative impact on the dollar, because it is not entirely clear how this will end and what the design of the power system in America will be. And a lot depends on it, especially when it comes to investment planning. Obviously, if there is a conflict between the White House and Congress in the United States, this will lead to paralysis of the political system, and the resolution of economic issues will be inhibited, which will negatively affect the return on investment. So there is nothing surprising in the fact that investors got rid of the dollar.


Not only the elective hassle weakened the dollar, since macroeconomic statistics also contributed to this process. Thus, the JOLTS data showed that the number of open vacancies decreased from 7,293 thousand to 7,009 thousand, which greatly reduces any likelihood of further improvement in the labor market. True, the American labor market and so it looks much better than its neighbors on the planet, so it's not surprising that signs of deterioration should appear sooner or later. It is worth noting the contribution of European statistics, because, in the Old World, the growth rate of producer prices accelerated from 4.3% to 4.5%, and did not remain unchanged, as predicted. So market participants have hoped for a further acceleration of inflation, which could force the ECB to curtail the quantitative easing program and start raising the refinancing rate. In addition, the totals for business indices were better than preliminary estimates. In particular, the index of business activity in the services sector fell from 54.7 to 53.7, and not to 53.3. The composite index of business activity fell from 54.1 not to 52.7, but to 53.1. So the single European currency had reasons for growth.

Today, everyone will follow the vote count in the United States of America. At the moment, it is known that the Republicans retained a majority in the Senate, but in the Congress, the Democrats took revenge for 2016. Now, the only question is how many congressional seats will be controlled by Democrats who have the most tender feelings for Donald Trump and his economic program. Naturally, the Democrats will in every way impede the implementation of Donald Trump's plans, which will lead to paralysis of the system, since it will not be able to take any decisions. As a result, some kind of suspense is formed, and investment planning will become difficult, which can have a negative impact on the state of the American economy. In addition, in the United States, data on consumer lending will be published, the volume of which may be reduced from 20.1 billion dollars to 16.5 billion dollars. So the prospects for the dollar today are not the most beautiful.


If we talk about the European Union, the growth rate of retail sales, the data on which are published today, should slow down from 1.8% to 0.7%. This is already a negative factor, and a very strong one, since such a strong decline in consumer activity is not compensated even by inflation. In other words, the European Central Bank will have a serious reason for the next extension of the quantitative easing program. But what is happening in the US will smooth out this negative, and the single European currency is consolidating at a mark of 1.1475.


Weak statistics are also expected in the UK. So, according to Halifax, the growth rate of housing prices should slow down from 2.5% to 1.2%. The real estate market is almost the main thing for determining the investment attractiveness of the UK, and such a sharp decline in housing prices will have a very negative impact on the pound. But again, the uncertainty about the future development in the United States will outweigh, so the pound has every chance of gaining a foothold at around 1.3150.


The material has been provided by InstaForex Company -