The euro will continue to fall, as the eurozone economy is showing more and more signs of a slowdown. Meanwhile, the dollar will go up despite the Fed's possible caution, which may well halt the rate increase cycle.
The unexpected decline in industrial production in Germany had a negative impact on the single currency. The fall, although modest, highlighted concerns about the ECB's confidence in the need to curtail incentive programs. It is worth noting that the decline in German industrial production has been observed for the third month in a row. Local exporters suffer from weak global demand and trade disputes caused by the policies of US President Donald Trump.
Weak data may interfere with the ECB's plans to tighten monetary policy and pull the euro down, which has already dropped to $ 1.1285. In general, the currency has been trading in a narrow range from 1.12 to 1.15 dollars since mid-November.
The weakness of the euro supported the dollar but growing expectations that the Fed will stop its rate hike cycle put pressure on the US currency, which will be a decisive factor in the short term. Recalling what Fed Chairman Jerome Powell said, the regulator will monitor indicators and downward risks that affect markets. The prospect of further rate hike is likely to keep the dollar under pressure.
