The good news that the Italian government has reached an agreement with the European Union, although it supports the euro, however, the upward potential in risky assets will directly depend on the reaction of traders to the statements of the US Federal Reserve.
As it became known, the problem associated with the draft national budget of Italy for 2019, has been resolved. This will allow the Italian authorities to avoid more serious conflict with the trade and political bloc.
Let me remind you that in the autumn of this year, the draft budget of Italy was submitted to the EU, which provided for a budget deficit of 2.4% of GDP. This was contrary to EU rules, which forced the European Union to launch an excessive deficit procedure for Italy and caused investors anxiety.
Fed and interest rates
All attention this afternoon will be riveted to the results of the meeting of the Federal Reserve System, which began yesterday. As most economists expect, the Central Bank will raise the key interest rate to 2.5% from the current 2.25%. However, the Fed may lower its forecasts for the number of rate hikes next year, which will definitely have a negative impact on the short-term growth of the US dollar.
As stated earlier, the Fed leaders at their meeting in September planned three rate increases in 2019 and another one in 2020. However, according to the forecasts of many experts, the Central Bank may limit itself in 2019 to only two increases.
The data, which came out yesterday afternoon, led to the strengthening of the American dollar and the return of some positions paired with the euro and the British pound.
According to a report by the US Department of Commerce, the number of new home bookmarks in the US this November has increased. Thus, the number of bookmarks in November increased immediately by 3.2% compared with the previous month and amounted to 1.256 million homes per year. As for the number of building permits, during the reporting period, it grew by 5.0% compared to October, to 1.328 million homes per year. Economists predicted that the number of bookmarks, on the contrary, would decrease by 0.7%, while the number of permits would fall by 0.2%. Compared with the same period of 2017, the number of bookmarks increased by 5.1%.
As for the technical picture of the EUR / USD currency pair, the upward potential will remain in the first half of the day, which will allow the bulls to renew the large maximum around 1.1400, which will limit the growth of the euro. The only delay in raising rates next year, together with a revision of a number of forecasts for the growth rate of the US economy, will strengthen the position of buyers of risky assets, leading to new highs of 1.1450 and 1.1490.
Canada
The Canadian dollar fell sharply yesterday in tandem with the US dollar after it became known that supplies in the manufacturing sector of Canada declined in October due to a sharp drop in sales of primary metals.
According to the report of the Bureau of Statistics of Canada, sales in the manufacturing sector in October 2018 decreased by 0.1% compared with the previous month and amounted to 58.25 billion Canadian dollars. Economists, by contrast, expected sales to grow by 0.4%.
The material has been provided by InstaForex Company - www.instaforex.com