Side trend in the currency markets continued

Last week, the foreign exchange market continued to show uncertain dynamics. There is a lot of reasons for this, which by their influence and some factors lead to the rope pulling effect. The dollar drops against the main currencies and gets support against others.

The main negative for the rate of the American currency is the intrusive signals of some Fed members about the need for a pause in raising interest rates and Lael Brainard even agreed to stop the process of reducing the bank's balance sheet. At the same time, for example, President of the Federal Reserve Bank of Atlanta, Raphael Bostic believes that it is too early to make a decision on changing the exchange rate while assessing the prospects for the country's economy is still very high. In his opinion, the likelihood of a single increase in interest rates is still valid.

Another important factor that brings uncertainty is the trade negotiations between Washington and Beijing which dominates the markets. Despite the positive reports of the American president, there is no serious reason to hope that the trade war will take a milder form if it does not stop. The weakening growth of the Chinese economy has already had a negative impact on Europe, which is already aggravated by the Brexit problem. The slowdown in the growth of the eurozone economy against the background of the risk of recession due to inflationary will definitely force the ECB not to take measures in changing the monetary policy, which puts pressure on the common currency rate.

At the moment, investors are waiting for updated data on US GDP and a noticeable drop in the growth rate may once again change the wind direction in financial markets, which may start to inflate the sails of the US dollar due to increased demand for it as a safe haven currency.

Summarizing, we note that our view on the short term remained the same yesterday. We expect to maintain overall lateral dynamics. A weak US GDP data will increase the demand for the dollar, which may again reach local highs but recall that this movement will be in line with the side trend.

Recall that Monday is a holiday in the US which limited the activity on the market.

The material has been provided by InstaForex Company -