The dollar rose slightly on Wednesday, after the announcement of the results of the two-day meeting of the u.s. Federal Reserve, which generally meet the expectations of the market.
FOMC has announced its intention to launch a program to normalize the balance sheet in October. It is expected that the monthly volume of cuts will be $ 10 billion.
The Fed’s updated forecasts on rates and the economy in general met expectations. The forecast for the GDP in 2017 from 2.2% to 2.4%, and the forecast for the unemployment rate for 2018/19 has also been improved, but the forecast for core inflation for the next two years has been aggravated.
Most of all, the market has been interested in forecasts about the rate. The Fed has confirmed its intention to raise the rate again this year, and three times in 2018, which leads to an increase in market expectations of 72% (according to the CME on the futures market data).
During the press conference of Janet Yellen did not directly answer the question of why the Fed has not reacted to the slowdown of inflation by the mitigation policy. Yellen responded only that she was «inspired» by improvements on the labour market. The response of the head of the FRS must be understood in such a way that the regulator continues to believe in the «Philips curve» and implies that the factor of full employment will ensure the growth of inflation.
Of the euro area
The indicator of economic sentiment ZEW in Germany increased in September to 17.0 p. against 10.0 p a month earlier, but remains below the long term average of 23.8 p. In the release notes of the German economy is experiencing strong growth, the sharp increase of the bank’s lending and investment activities of the government and private companies.
The euro, which in recent years has been actively used as a funding currency remains under pressure amid growing interest in risk. The probability of a correction by the EUR/USD at 1.16 and is preserved in the context of a high probability of dollars of growth in the short term.
Retail sales increased unexpectedly in August, well above forecasts, the fastest pace in the last 4 months. The growth was 1.0% vs. 0.6% a month earlier, a year-on-year growth of 2.4% vs. 1.4%, in both cases, the market expected a slowdown, not growth.
The strong retail sales growth, increases the likelihood that the Bank of England tightening its program. At the same time, the market has reacted very moderately to the surprise of the high rates, the book has not left the time channel and quickly returned to the average of the daily levels.
The negotiations on brexit remains a significant risk factor. More and more, politicians are inclined to the fact that the negotiations fail, and the EU and great Britain will be forced into their trade relations to move from the free trade regime with the WTO rules, which will cause the British economy more damage than is currently estimated by the market. British banks may lose the right to conduct business in the EU without creating subsidiaries, which will inevitably worsen the state of the financial system, and the reduction of exports due to the increase of tariff rates will affect the labour market and the real incomes of citizens.
The book has shown the strong dynamic in the last few months, however, for the continuation of the growth of the park, until now. The book can update its maximum and reach 1.3850 / 3950, but only if there are real reasons to expect positive in brexit negotiations. More likely scenario is the correction to the reduction of the support area of 1.3100 / 3250.
Oil and the ruble
The OPEC countries Technical Monitoring Committee said on Wednesday that the OPEC countries + agreement was completed in August of 116%, which is much higher than the 94% a month earlier, and by the end of the first half of the year, in compliance with the agreement was 98%, which can be considered as a success. On 22 September, the committee held a special meeting in preparation of the ministerial meeting of November, where it is expected that a decision on the extension of the agreement after March 2018 will be taken.
The FOMC’s decision to raise the forecast for the GDP in 2017 has also had an impact on the growth of quotations, as it indicates the probability of exceed the demand for oil and petroleum products.
Brent for the first time since the month of April has increased by more than $ 56 per barrel, positive sentiments continue to dominate.
The decline of the ruble is corrective after a steady growth in August-September. The strengthening of the ruble is currently hindered by the growth of the dollar after the FOMC meeting, but in the long term, the ruble will feel confident enough, and one can expect that the growth factor of the oil and of the approach of the tax period prevails in investor sentiment. For the short term, we can expect at the end of the softening period and of the decline of the USD/RUB to 57.50.