Slowing inflation in the United States will make the dollar adjust
Investors once again remembered that the dollar remains not only a safe haven, but, perhaps, the only one of the main ones related to the Central Bank, which continues to steadily raise interest rates.
On Thursday, market participants began to buy the US dollar, as if recalling that several “played” its sales. As we pointed out earlier, there really are grounds for this. The first is the active position of the Fed in the issue of tightening monetary policy. The bank by its resolution, and its leader J. Powell in his speech on Wednesday, made it clear that it will definitely continue to raise rates to 2020 inclusive. The second is the tense situation in the world, both from the geopolitical and economic point of view, which forces market players to insure themselves against risks by buying not only state bonds, but other protective assets, including the US dollar.
Today, the market will focus on the publication of an important for the Fed index of the basic index on personal consumption (RFE) in the US, which clearly demonstrates the dynamics of personal consumer inflation. It is assumed that year on year, the indicator will keep its growth rate at 2.0%, but its monthly value will decrease in growth to 0.1% in August from the July increase of 0.2%. In addition, it is expected that the income of Americans last month increased by 0.4% from 0.3%, while expenses, on the contrary, decreased to 0.3% from 0.4%.
Attract attention and consumer inflation in the euro area. According to the forecast, the consumer price index (CPI) in the euro area on an annualized basis should grow to 2.1% against 2.0% in the period before. The basic consumer inflation should add 1.1% against 1.0% year on year.
How can the main currency pair react to these important published economic data? In our opinion, if the data from the US shows a slowdown, and the eurozone confirms the forecast, then we should expect local growth of the pair. But if the US statistics show a positive dynamics, and the European statistics, on the contrary, its decline, the euro / dollar pair can continue its local decline, while maintaining a period of consolidation.
Forecast of the day:
The currency pair EUR / USD is trading above the level of 1.1635 pending the release of statistics from the euro area and the US. If it turns out to be positive for the dollar, then lowering the price below this level will lead to a fall of the pair to 1.1540. If the situation is reversed and the data from the euro zone is stronger, then the pair may recover to 1.1725.
The currency pair GBP / USD is trading above the level of 1.3065. The situation, in this case, can be similar, as with the pair of euro / dollar. The positive for the dollar will push the pair down after the decline below the level of 1.3065. Negative to its probable increase to 1.3200.