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20.09.2019 12:06 PM
The dollar lost enthusiasm after Fed rate cuts

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The key world currency has lost momentum for growth after the recent meeting of the US Federal Reserve and another interest rate cut. The dollar retreated slightly, sinking 0.22% against a basket of currencies, and entered a downward trend.

Analysts do not exclude that the current weakening of the US currency is temporary, and the dollar is gathering strength before the next breakthrough. It fell significantly against most world currencies after a statement by Michael Pillsbury, US President Donald Trump's adviser on China. Recall, the representative of the US administration said that the president can raise duties on Chinese goods to 50% or even 100%. Pillsbury also does not rule out the introduction of other measures, for example, concerning financial markets, which may limit the access of Chinese companies to borrowed funds in the United States.

Currently, the US dollar index, that is, the ratio of the US currency to a basket of other currencies – America's trading partners – continues to decline, playing back the softening of the Fed's rhetoric and policies.

The weakness of the dollar helped the European currency to rise, analysts say. A moderate rise was recorded in the EUR/USD pair after the US Federal Reserve reduced the interest rate by a quarter of a percentage point in the range from 1.75% to 2%. The pair showed an increase of 0.2% to 1.1056. Note that the tandem seeks to break through the resistance level of 1.1071 throughout the trading week.

On Friday, September 20, it is expected to overcome the resistance level and the movement of the EUR/USD pair to two target levels – 1.1145 and 1.1215. Analysts expect a positive scenario, despite the instability of the external background. Some degree of tension in world markets is due to the divergence of views of US officials on future incentives. This calls into question the further reduction of interest rates in 2019, which is negatively interpreted by the markets, experts emphasize.

Larisa Kolesnikova,
Analytical expert of InstaForex
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