empty
 
 

Forex Analysis & Reviews: Why is the dollar growing again? (We expect a local decline of EUR/USD and GBP/USD pairs)
time 23.07.2019 11:07 AM
time Relevance up to, 25.07.2019 09:06 AM

Against the background of the almost weekly statements by the head of the United States of America D. Trump saying that it is necessary to lower the rate of the national currency in order to achieve "parity" with other major currencies, there has been a growing appreciation of the currency recently.

So what is the cause or causes of the strength of the American currency?

They are, and there are several of them. The first and main is the uncertainty of the future monetary policy of the Fed. Let us remember a bit of history on this sensitive issue. At the December 2018 meeting, the Fed recognized the state of the American economy as positive and said that they plan two more interest rate increases this 2019 by a total of 0.50% to 3.00%. However, the sharp collapse of the American stock market in December and then, perhaps the regulator's subsequent realization that it would be difficult to come to terms with the Chinese on US trade, led to a change in rhetoric. The bank made it clear that one should not expect the next planned increases and that it is possible that it may begin lowering interest rates for the first time in the last 10 years even against the background of the deepening trade war with China. From this moment, the actual period of uncertainty begins.

At first, the dollar was under pressure in this situation, but when the US economy began to demonstrate the absence of unambiguous dynamics (both positive and negative), it became clear that the Central Bank would not do anything until it made sure where it would move. This caused a shock in the markets that were previously almost 100% sure that the course of its support will be chosen. In addition, Trump has repeatedly called for lower interest rates, exerting verbal pressure on the Fed.

At the moment, investors are confident that on July 31 the key interest rate will be raised by only 0.25% and not by 0.50% as it was considered only recently based on the dynamics of the futures on federal funds rates. Today, this probability is estimated at 76.5%.

So why is the dollar growing? The reason lies in the fact that it receives support not only on lowering expectations of cutting rates at once by half a percentage point but also considering the movement of the US currency previously as it has actually taken into account the reduction of rates by 0.25% and even threatened them more by 0.50%. The market simply returns to equilibrium.

Another important reason is the expectation of the coming fall in the single currency rate against the background of the slowdown in the growth of the European economy. In a situation of risk of a full-blown recession in Europe, investors are looking for reliable assets and turn their eyes to dollar assets to a large extent, which stimulates the strengthening of the US currency.

We believe that if the indicator of sales in the secondary housing market in the United States today will show growth, this will stimulate the continuation of the local strengthening of the dollar will show growth today.

Forecast of the day:

The EUR/USD pair broke out of the range of 1.1200-1.1385, which may stimulate its further decline to the level of 1.1120.

The GBP/USD pair is trading above 1.2445 in the wake of the expectation of choosing a new prime minister in Britain. The victory of Boris Johnson may lead to a further fall in the pair, if from a technical point of view it drops below 1.2445. In this case, it may fall to 1.2380.

This image is no longer relevant

This image is no longer relevant

Pati Gani,
Analytical expert of InstaForex
© 2007-2023
EURUSD
Euro vs US Dollar
Select timeframe
5
min
15
min
30
min
1
hour
4
hours
1
day
1
week
Start trade
Start trade

InstaForex analytical reviews will make you fully aware of market trends! Being an InstaForex client, you are provided with a large number of free services for efficient trading.

  • Grand Choice
    Contest by
    InstaForex
    InstaForex always strives to help you
    fulfill your biggest dreams.
    JOIN CONTEST
  • Chancy Deposit
    Deposit your account with $3,000 and get $10000 more!
    In January we raffle $10000 within the Chancy Deposit campaign!
    Get a chance to win by depositing $3,000 to a trading account. Having fulfilled this condition, you become a campaign participant.
    JOIN CONTEST
  • Trade Wise, Win Device
    Top up your account with at least $500, sign up for the contest, and get a chance to win mobile devices.
    JOIN CONTEST
  • 100% Bonus
    Your unique opportunity to get a 100% bonus on your deposit
    GET BONUS
  • 55% Bonus
    Apply for a 55% bonus on your every deposit
    GET BONUS
  • 30% Bonus
    Receive a 30% bonus every time you top up your account
    GET BONUS

Recommended Stories

Investors are starting to be pleased with IMF forecasts, which is positive for the pound and the euro.

The International Monetary Fund has increased its economic growth forecast after a challenging year for the world economy, in part because of stable US spending and the removal of Chinese

Jakub Novak 15:52 2023-01-31 UTC+2

The economy of France has survived, but strikes can cause significant damage.

According to data that has been made public, France managed to prevent an economic recession at the end of the year. In the meantime, market participants are hoping that

Jakub Novak 15:34 2023-01-31 UTC+2

Pound sterling prepares for rising storm

Market players do not always have the right outlook on monetary policy, something that central banks occasionally point out. In November, markets were expecting the BoE's repo rate

Marek Petkovich 12:54 2023-01-31 UTC+2

Gold goes into correction

For the eighth straight week, hedge funds increased their bullish positions in gold and decreased their bearish bets, according to the latest trading data from the Commodity Futures Trading Commission

Irina Yanina 12:48 2023-01-31 UTC+2

Markets await positive outcome from the Fed's monetary policy meeting

Markets came under strong pressure on Monday due to the closing of many long positions ahead of the Fed monetary policy meeting. This is to be expected as investors usually

Pati Gani 11:18 2023-01-31 UTC+2

Outlook for GBP/USD on January 31. GBP gets stuck.

The pound/dollar pair opened a new trading week with low volatility. The pair has been trading near its local highs for several weeks already. Meanwhile, the possibility of the double

Paolo Greco 11:16 2023-01-31 UTC+2

Britain is going through a difficult period.

What conclusions can we draw now that another week on the foreign currency market has ended? Unfortunately, there aren't many conclusions because there weren't many news or economic reports this

Chin Zhao 08:51 2023-01-31 UTC+2

Oil sets a trap

Oil is an indicator of the health of the global economy. It is not surprising that when caution replaced euphoria in the diagnoses of its further development, Brent took

Marek Petkovich 08:27 2023-01-31 UTC+2

EUR/USD. Overview for January 31, 2023

The EUR/USD currency pair began the week as uninteresting as possible. However, it is evident from the illustration above that the pair has been trading in this manner for several

Paolo Greco 06:55 2023-01-31 UTC+2

The Fed, the ECB and the Bank of England are getting ready to bring the markets out of their slumber. Overview of USD, EUR, GBP

Speculative net positions on the U.S. dollar continue to fall. As it follows from the CFTC report, the total short position rose by 671 million to -7.283 billion, with

Kuvat Raharjo 22:50 2023-01-30 UTC+2
Can't speak right now?
Ask your question in the chat.