The euro rose strongly against the US dollar after the Democrats and Republicans yesterday did not find a solution to the problem of harmonizing the federal budget. Additional pressure on the US currency was put on the Federal Reserve protocols from the December meeting, as well as speeches by Fed representatives.
American President Donald Trump yesterday called the border issue a dangerous issue, confirming that Democrats and Republicans are working to solve the problem of government suspension. Trump also made it clear that if Congress does not find a solution, it will go the other way.
Fed Protocols
The minutes of the December Fed meeting indicated a rather limited number of future interest rate hikes this year, and the Fed leaders expressed less confidence about the timing and scale of future rate hikes. The main factors that influence the further increase in interest rates are related to market volatility, here we are talking directly about the stock market, as well as a slowdown in global economic growth, which creates uncertainty about the Fed's policy.
In the Fed's minutes, the record that after raising the rates in December 2018 they reached the lower limit of the neutral range was very important. This once again confirms the fact that the Fed is very close to its goal and further increases will occur only with very urgent need. Many Fed leaders also said that low-key inflation allows the Fed to be patient in raising interest rates, and noted that neither the exact timing of the rate hikes or the level to which they will eventually rise is unknown. The main focus of monetary policy will continue to be on incoming economic data.
As for economic forecasts, they remained almost unchanged at the December Fed meeting. Economists forecast slightly slower US GDP growth in the 4th quarter of last year compared with growth in the 2nd and 3rd quarters.
The speech of the President of the Federal Reserve Bank of Boston in the second half of the day was similar in nature to the statements made by his colleagues on the role.
Erik Rosengren said he was ready to abandon the further increase in interest rates to clarify the prospects for the US economy. According to him, the Fed has time to wait for the situation to clear up before raising rates next time.
As for the technical picture of the EUR / USD currency pair, the bulls have rested against the next resistance level of 1.1570, and after a small downward correction, which can be formed today in the first half of the day, demand may resume. Consider long positions best after correction in the area of 1.1540 and 1.1520. The breakdown of 1.1570 will open a direct path to risky assets in the high areas of 1.1610 and 1.1650.
The Canadian dollar "slowed down" with growth after yesterday the Bank of Canada left its key rate unchanged, at the level of 1.75%. At the same time, the Canadian regulator lowered its forecasts for GDP growth for the current year due to lower oil prices.
The head of the Bank of Canada, Poloz, noted that the trade war launched by the United States is beginning to have a negative impact, and low oil prices hinder wage growth and the economy.
The material has been provided by InstaForex Company - www.instaforex.com