The coming week will be filled with events that will undoubtedly have a noticeable impact on the dynamics of world markets. These are the meetings of the Fed and the ECB on monetary policies, as well as the elections in the British Parliament. In addition, important economic data will be published, primarily on inflation and retail sales in the States.
At the same time, regarding the expected results of the Fed meeting, it can be noted that the regulator will most likely decide to leave rates unchanged, motivating it with the need to observe the development of the situation in the country's economy, as well as on the external side, in the global economy. The basis will also be a positive assessment by the Central Bank of the situation on the labor market and in the economy as a whole, despite the problems of trade relations between America and China. Thus, the Fed decision will be positive for the dollar.
Meanwhile, in regards to the outcome of the meeting of the European Central Bank, it can be noted that it will be quite difficult to decide on the further monetary rate. On the one hand, economic growth in the eurozone remains quite weak, and the previous leader of the bank M. Draghi was not in vain advocating large-scale incentive measures, believing that the regional economy needs them. But on the other, there is opposition in the face of representatives of economically strong countries that urge not to carry out further global incentive measures. The leaders of the central banks of Germany, Austria and others believe that this should not be done. In this situation, C. Lagarde will need to make responsible and difficult decisions.
In our opinion, it will still be inclined to the need to continue a soft monetary policy, which will be negative for the single currency rate. In this case, we believe that the euro / dollar pair will resume its decline.
Moreover, the result of the election in the British Parliament could be the real prospect of Britain leaving the EU against the backdrop of the victory of the current Prime Minister B. Johnson, by the end of January next year. Such a prospect will be a blow to the British currency.
It seems to us that the positive factor for consumer inflation and retail sales will also be a positive factor for the dollar. Therefore, it is expected that inflationary pressure will remain in annual terms at 2.3%, and in November it will grow by 0.2%. Production inflation, in turn, will add 1.2% over the year versus 1.1%, although it will slow down the growth rate to 0.2% in November from 0.4% in October. In addition, strong dollar values and their volumes will also serve as a basis for strengthening the dollar. It is expected that the basic retail sales index in November will grow by 0.4% against the increase a month earlier by 0.2%, while retail sales will rise sharply by 0.5% compared with the October increase of 0.3%.
Summing up, we believe that the outcome of the meeting of the Fed and the ECB will support the dollar exchange rate in the pair euro / dollar and against the dollar against a basket of major currencies, and strong values of economic statistics which can lead to its local strengthening by the end of this week.
Forecast of the day:
EUR/USD pair is consolidating in the range of 1.1050-1.1085 in anticipation of the final decisions of the Fed and the ECB on monetary policies. We believe that this dynamic will continue today. However, according to the results of the meetings, we believe that the pair will have more reasons for lowering than for growth. Thus, we consider it possible to sell the pair if it falls below the level of 1.1050 with a likely decline to 1.0990.
Gold is consolidating above the level of 1458.30. We consider it possible to resume its sales, after lowering the price below this level with the goals of 1452.45 and 1439.00.
