The Fed Chairman's speech, which took place in Zurich on Friday night, was decisive, as statements were made before the next meeting of the Federal Reserve on September 17-18, at which, as expected, the committee may decide to further reduce interest rates. However, it should be noted that the head of the Fed did not directly talk about this, touching only on the topic of summer easing of monetary policy.
Jerome Powell, most likely in response to all the attacks from Donald Trump, once again stressed that the Fed retains independence from policy when making decisions on interest rates, adding that the US economy is in good shape, and the prospects remain favorable.
Powell was concerned about the fact that the slowdown in global economic growth, trade uncertainty, and low inflation continue to pose special risks for the US economy, but stressed that he expects it to grow by 2% -2.5% in 2019, as well as inflation in the region of 2.0%.
Expectations that the Fed will lower interest rates during the September meeting were strengthened after a committee chairman said the recent cut in rates had supported the economy and kept the prospects favorable. Powell also added that the Fed will continue to act appropriately to support economic growth by continuing to use various tools, hinting at a return to the asset buyback program.
Before that, throughout the week, representatives of the central bank also repeatedly drew attention to the need to ease the course of monetary policy, but not all of them were in favor of lowering interest rates.
Data released on the American economy on Friday afternoon confirmed the need for measures, but a slight slowdown in labor market growth does not yet indicate a 100% chance of lowering rates.
According to data, employers in the United States in August 2019, although they continued to consistently hire new employees, were at a weaker pace.
A report by the US Department of Labor indicated that the number of jobs outside agriculture in August rose by 130,000, which was below the forecast of economists who had expected growth by 150,000. The unemployment rate in the country was 3.7% and remained at a low for the third month in a row.
Average hourly earnings also increased by 3.2% compared to August 2018.
As noted earlier, despite the growth in employment, the momentum is gradually decreasing, but given good consumer spending and the increase in incomes of Americans, it will not put serious pressure on the pace of economic growth.
Data on the state of the eurozone economy were much worse. However, this did not lead to the formation of serious pressure on the euro. On Friday morning, a very gloomy report on the German industry was released, which indicates poor prospects for the sector.
According to the German Federal Bureau of Statistics, industrial production in July this year fell by 0.6% compared with the previous month, while economists had forecast its growth by 0.1%. Production in the construction sector grew by 0.2% compared with June, while production in the manufacturing industry decreased by 0.8%.
Compared to July 2018, industrial production in Germany fell by 4.2%.
Data on the rate of economic growth in the eurozone were also no better. According to a report by the eurozone statistics agency Eurostat, the eurozone economy grew by only 0.8% year-on-year in Q2, after growing by 1.7% in Q1.
Not surprisingly, one of the main reasons that led to the decline in growth was the poor situation in the manufacturing sector. Eurozone manufacturing output declined by 0.8% in Q2 compared to Q1.
As for the technical picture of the EURUSD pair, you should not count on active movements at the beginning of the week. Most likely, the bears will try to return to the support of 1.1020, but the demand for the euro will resume after updating the lows around 1.0990 and 1.0950. However, only a breakthrough of the 1.1055 range will strengthen the demand for the trading instrument and lead to the updating of local maximums in the area of 1.1090 and 1.1120.
