The current situation in the financial markets at first glance is favorable for the US currency. The upcoming signing of the first phase of a new trade agreement between Washington and Beijing, scheduled for this Wednesday, January 15, inspires optimism. However, experts note a number of factors that can undermine the credibility of the greenback.
One of the reasons experts consider the slowdown in economic growth in the United States. Despite the power of the US economy, it is still present, being a fly in the ointment in a barrel of financial honey. An illustration is the indicator of employment in the non-agricultural sector of the United States, which amounted to 145 thousand people in December 2019, and over the past year, employment increased by 2.08 million people, which is less than the indicator of 2.51 million people recorded in 2018. Another factor in the slipping of the dollar may be data on the consumer price index for December. Experts have a double opinion on this score: current information can both support the US currency and push it down. The situation will depend on whether the current index value matches the previous forecast or the discrepancy with it.
An additional driver of the greenback's potential fall may be the actions of the Federal Reserve. Recall that since the fall of 2019, the regulator has been implementing a quantitative easing (QE) program, skillfully disguised as other economic measures. However, the Fed's actions, which is not recognized in the conduct of QE, indicate the opposite, experts said
A positive moment for the greenback was the attenuation of the Middle East conflict, the risk of further revelation of which was very great. The absence of a negative background from the Asian side contributed to a partial recovery of markets and increased investor risk appetite. However, the greenback was again under pressure, although it radiated confidence during the escalation of the Middle East crisis. The reason for this, in addition to the general slowdown in US economic growth, analysts believe the disappointing data on the number of new jobs for December 2019 recorded in the US economy. Recall that the number of new jobs amounted to 145 thousand compared to the forecast of 164 thousand. Low rates of average hourly wages added fuel to the fire. It fell to 0.1% in December, although economists had expected it to rise by 0.3%. On an annualized basis, the growth in average hourly wages decreased to 2.9% from the previous 3.1%. In this regard, many investors believe that the US economic growth rate will also decline. Such a situation could force the Fed to return to lower interest rates, analysts warn.
The implementation of such a scenario will become a significant negative for the dollar, fueling its downward trend. The weakening of the greenback will be facilitated by the signing of an agreement between Washington and Beijing, while the demand for risky assets will increase. An additional factor of pressure on the greenback will be the current negative effect of macroeconomic statistics in the US, although its impact can not greatly undermine the dollar, experts said.
Subsequently, the pair subsided to 1.1119, making desperate attempts to get out of this pit. However, its efforts were not rewarded as soon as expected.
On Tuesday morning, January 14, the EUR/USD pair rose to the level of 1.1139, having won back yesterday's loss. Nevertheless, the pair failed to gain a foothold at this level.
Currently, the EUR/USD pair runs near 1.1134, having slightly lost previous achievements, but still remaining in a relatively acceptable range.
According to experts, the EUR/USD pair expects a difficult period. The euro will slow down the eurozone economy and the situation around Brexit, and the dollar will have to overcome the negative from the Fed stimulus measures and weak data on the number of new jobs in the US labor market. However, the pair will be able to cope with the situation and wrap the negativity to its advantage, experts said.
