The US dollar continued to strengthen its position against a number of world currencies. On the one hand, the dollar is supported by investors' expectations that the Fed will continue to raise interest rates. On the other hand, Italy's fiscal problems and ECB measures, along with trade sanctions from the United States, alienate traders from risky assets.
Today, all attention will be focused on the speech of the Federal Reserve Chairman, who may signal how the committee is set to act in 2019. Let me remind you that almost no one doubts that in December of this year the interest rate in the USA will be raised again. Many experts expect that in 2019, there will be at least three rate increases. However, a slowdown in economic growth may significantly affect expectations. On Wednesday afternoon, a report will be released on US GDP growth rates for the 3rd quarter of this year. Here we look.
An interesting study was published yesterday that says that if the aggregate global interest rate exceeds 2.5%, this could trigger a new financial crisis. It is also noted that over the past few years, the world interest rate has increased from 1.2% to 2.2%, approaching its peak. Experts estimate the ceiling in the region of 2.5%.
Yesterday's speech by Richard Clarida, vice chairman of the Federal Reserve, was able to support the US dollar. In his opinion, inflation is restrained, despite strong economic growth, as are fundamental economic indicators. Good employment growth has supported the US economy for two years now. Clarida expects inflation to keep near the Fed's target level of 2%.
With regard to interest rates, then, according to the representative of the committee, monetary policy will continue to depend on the incoming data, and if inflation exceeds forecasts, management will revise its policy towards a more rigid one than it is now. Clarida also believes that it is not necessary to determine the course of monetary policy in advance since the current system of control over rates works very well.
As for the fundamental data that came out yesterday afternoon, on the one hand, the decline in home prices in the US is good news for buyers, but the decline in American consumer confidence, on the contrary, is a wake-up call.
According to the data, the national house price index S & P and Case-Shiller in September of this year grew by only 5.5% compared with the same period of the previous year, after rising by 5.7% in August. The price index for 10 megacities in September rose by 4.8% compared with the same period of the previous year, after rising 5.2% a month earlier, while the index for 20 megapolises grew by 5.1%.
The decline in US consumer confidence in November is not a serious concern. According to the Conference Board report, the consumer confidence index in November fell to 135.7 points from a maximum of 137.9 points when it reached a maximum since 2000. Economists had expected the index to be 135.8 points in November.
As for the technical picture of the EUR / USD currency pair, much will depend on whether the sellers are able to break below the support of 1.1285, which will lead to a new wave of sales of risky assets with a 1.1250 and 1.1220 minimum. In the case of an upward correction of the euro, sales can be seen after the test of resistance of 1.1330 and 1.1360.
The material has been provided by InstaForex Company - www.instaforex.com