On the first day of the new week, the US dollar received significant support in the wake of two reasons. The first can be attributed to high expectations that the Fed will raise interest rates for the fourth time next month, and the second, fear that the world economy has really begun to slow down in its growth.
The final decision of the Fed at a meeting last week made it clear to the markets that we should expect the continuation of the interest rate increase cycle not only in December but also in the next two years. At the moment, according to the dynamics of futures on federal funds rates, this possibility is considered with a probability of 75.8%, which seems to be only growing by December 19, when the meeting itself will take place. These expectations are also supported by the good state of the American economy and the growing wage growth of Americans against the background of a sharp increase in industrial inflation, which was signaled by economic statistics published on Friday.
The dollar rose sharply on Monday because of its function of a safe haven currency. The ICE index overcame a maximum of August 12 of the current year and at the time of this writing is at the level of 97.33 points. The reason for this dynamic is the growing fears among investors that the world economy has begun to give real signals about its slowdown. This process is further aggravated by the trade conflict between the States and China, as well as the growing tensions in Europe due to the EU's unwillingness to accept the Italian budget in the form proposed to it.
In the wake of a number of these factors, the dollar received support against all major currencies, but most noticeably it rose to the euro and the British pound, which became hostages of European problems, Britain's exit from the EU, or rather, the unresolved issue and the risk of a new debt recovery. The crisis in Italy, which was "flooded" with money during the acute phase of the last crisis of 2008–09.
Given this scenario, we believe that the smooth strengthening of the US dollar will continue.
Forecast of the day:
The currency pair EUR / USD is trading above the level of 1.1220. It remains under pressure and it is likely that its downward trend will continue, after crossing this level, it may fall to 1.1150.
The currency pair GBP / USD is trading below the level of 1.2900. If the pair does not grow above this mark, it should be expected to resume its fall to 1.2800.
