Overview of the foreign exchange market on January 10, 2019

The dollar was quite briskly losing its position largely because of the content of the text of the minutes of the meeting of the Federal Commission on Open Market Operations. And it lost its position in relation to all currencies, and most of all to the single European currency, which could boast yesterday with data on the labor market. The unemployment rate in Europe, which is still at extremely high levels, continues to decline and fell from 8.0% to 7.9%. Of course, this could not fail to please investors, which was reflected in the more active growth of the single European currency. If we talk about the text of the minutes of the meeting of the Federal Commission on Open Market Operations, shortly before its publication, Charles Evans said that he did not rule out the possibility of a threefold increase in the refinancing rate in the current year. That is, the rate will not increase by yes to 3.0%, but to 3.25%. In his reasoning, he relied on the good macroeconomic dynamics that the American economy really demonstrates. But his words did not have the desired effect, as many decided to wait for the publication of the protocol and find confirmation of his words in it. To great disappointment, the text of the protocol does not contain any hints on such a development of the situation. On the contrary, most members of the Federal Reserve Board see systemic risks that could lead to a noticeable deterioration of the macroeconomic situation. It is for this reason that it was decided to revise plans for the rate of increase in the refinancing rate for the current year.


In many ways, the weakening of the dollar was also related to the expectations of today's publication of the minutes of the European Central Bank board meeting. If the Federal Reserve System announced a decrease in the rate of growth of the refinancing rate, then from Mario Draghi, we are still waiting for the beginning of the tightening of monetary policy. However, there is every reason to believe that the text of the minutes of the meeting will only hint at such actions. Most likely, it will contain cautious passages about the need to closely monitor developments after the curtailment of the quantitative easing program, and at the end of spring or early summer, the European Central Bank will only discuss the possibility of raising the refinancing rate by the end of this year. That is, there is no talk about raising the refinancing rate. And this will already have a negative impact on the single European currency.


The text of the minutes of the meeting of the European Central Bank will almost certainly disappoint investors, which will lead to a decrease in the single European currency to 1.1500.


The pound will follow the single European currency, so it will have to decrease, however, to 1.2725.


The material has been provided by InstaForex Company - www.instaforex.com