The US remains in the lead in the currency ring in the EUR/USD pair. The greenback feels very confident amid the weakening euro and pound. The European currency along with the British pound are in turmoil in anticipation of the upcoming difficult week.
The past week has not clarified the situation, and the current one promises to be very eventful, but it can also be confusing. The market is destabilized by the information that British Prime Minister Boris Johnson plans to hold early parliamentary elections on December 12, 2019. This further aggravates the already difficult situation with the country's exit from the EU. The foreign exchange market is experiencing severe congestion. The euro and pound fell against the US dollar following weak statistics last week, difficulties with Brexit and "farewell" statements by Mario Draghi. This situation was in the hands of the US currency, analysts said.
Due to the growing uncertainty in the financial market, many investors prefer to hedge the risks of a drop in the pound. A weakened British currency is pulling the euro along with it, risking a complete collapse of the single euro. Moreover, a high probability of a pause in the course of easing the monetary policy of the Fed gives strength to the bears that are working with the EUR/USD pair. The vast majority of experts (85%) are confident that the Federal Reserve will reduce the rate on federal funds at the next meeting, which will be held on October 29-30, that is, this week.
According to experts, a long pause in the process of such monetary expansion is favorable for the US currency. The dollar will not miss its point, analysts said. They note that while the Fed and the ECB are in thought, the EUR/USD pair risks getting stuck in the consolidation zone. On the morning of Monday, October 28, the pair was trading within 1.1087–1.1088, not too eager to increase.
Nevertheless, now the US dollar is on the rise. The greenback's positive mood was promoted by the statements of the Chinese and US leaders on improving relations, as well as corporate reporting by US companies, which turned out to be better than expected. The dollar is leading in the EUR/USD pair, while the euro is being driven. Currently, thanks to the greenback, the pair is showing a growth trend, rapidly rising to the levels of 1.1094–1.1095.
However, the positive stubbornly avoids the European. Experts consider early elections in the UK as the main risk factor for the single currency. In addition to the endless uncertainty with Brexit, the slowdown in the European economy also has pressure on the euro. Despite all the efforts of the ECB, inflation in the eurozone does not reach the target level of 2%. Recall that last month the regulator reduced the interest rate to negative -0.5% and announced the revival of the quantitative easing (QE) program. Experts believe that with the advent of Christine Lagarde, the new head of the ECB, we should wait for the next change. But at the moment, the advantage was on the side of the dollar, since the US Federal Reserve rate is positive and is at 2%.
According to experts, the appropriateness of expanding the monetary stimulus in the eurozone, initiated by M. Draghi, is doubtful, and the Fed's passivity may be the reason for the consolidation of the EUR/USD pair. Experts admit the possibility of such consolidation at the level of 1.1065–1.1115. Currently, the pair is trading in the range of 1.1091-1092. They believe that the subsidence of the European currency will continue in the short term, but in the future they expect it to turn upward. In the event of the implementation of such a scenario, the US currency will have to make concessions and make some room on its pedestal.
