The euro rose slightly after a sharp fall from yesterday's highs, when the pair was in the area of 1.1490, and then fell to lows in the area of 1.1310. Talk that the Federal Reserve will no longer raise interest rates in 2019 may have a negative impact on the US dollar. Despite several planned interest rate hikes in the US this year, the criticism of US President Donald Trump and the precarious position of the current Fed Chairman Jerome Powell can really affect the pace of monetary tightening this year.
One should not forget that confidence in the continued growth of the US economy at steady rates is also gradually decreasing, although at the end of this year few people believed in this, and the central bank gave completely different forecasts for 2019. Much will depend on the slowdown in the global economy, as well as on company investments and consumer spending.
Given the fact that the European Central Bank is planning for the first time since 2008 to begin a cycle of raising interest rates, the demand for the US dollar may weaken even more. The only thing that so far keeps the dollar at current highs against a number of world currencies is the weakening US stock market, which forces investors to reconsider their portfolios and turn to a safer bond market, where the level of profitability is gradually increasing due to higher interest rates in the US.
Today's data for the euro area helped the European currency slightly strengthen its position against the US dollar, but the upward correction did not continue.
According to the report of the European Central Bank, growth in lending to companies and households in the eurozone accelerated in November 2018 compared to the previous month, which will have a positive impact on economic growth in the future, as well as add optimism.
According to the data, the growth of lending to non-financial companies in November amounted to 4% against November 2017. In October, the growth was 3.9%. Annual household lending growth in the eurozone rose to 3.3% from 3.2% in October. The M3 monetary aggregate volume growth slowed to 3.7% in November from 3.9% in October, while economists had expected growth to be 3.8%.
As for the technical picture of the EURUSD pair, it is likely that the upward correction will be limited by the large resistance level of 1.1390, a rebound from which will lead to a new downward wave with a test of today's low in the area of 1.1310 and further sales to the area of 1.1270 and 1.1220.
The British pound fell after data showed that the Purchasing Managers Index (PMI) for the construction sector declined. According to the report, the index dropped to 52.8 points from 53.4 points in November. Economists had forecast that in December the index would be 52.9 points.
Markit noted that although the UK construction sector companies have lowered their expectations, they remain optimistic about new infrastructure projects in the transport and energy sectors.
In the first half of the day, data was also released, which indicated that the activity in the manufacturing sector of China declined in December. According to the National Bureau of Statistics of China, the Purchasing Managers Index (PMI) for the manufacturing sector in December 2018 dropped to 49.4 points from 50.0 points in November. Economists had expected the index to remain unchanged. A decrease in this indicator will have a negative impact on the economic growth rates for the 4th quarter of last year.
The material has been provided by InstaForex Company - www.instaforex.com