The book has climbed too high




The Fed, as expected, maintained the reference interest rate of the target between 1.00% -1.25% at its meeting which concluded yesterday, and no significant changes have been made to the text of the accompanying statement. The Fed noted that the drop in employment in September is one of the consequences of the hurricanes, and therefore will not impact on the economic data.

The dollar did not react to the results of the meeting, it is in the process of preparing for the two most important events that will take place on Thursday. As expected, the President Trump will announce his choice for the head of the Fed, and depending on who takes the position, the centrist Powell, or more «hawkish» candidate Taylor, the market would be to provide a distinct reaction in the form of the strengthening of the us dollar. For Thursday, the Republicans will be present at the Congress, a detailed plan for tax reform, this event is able to cause positive growth and will contribute to the growth of the value of the dollar.

Of the euro area

Macroeconomic indicators for the euro area this week are quite contradictory. According to the European Commission, the business climate is improving, following the results of the studies, published in October, in October, and has also contributed to the publication of Eurostat, preliminary data on the euro area, the GDP of the 3rd quarter, which were better than the forecasts.

At the same time, inflation unexpectedly slowed more than expected — the basis of the index of the euro zone fell to 1.1% from 1.3% in September, increasing the pressure on the euro.

Given the strong positive expectations for the dollar, the possible corrective growth of the euro is limited to a level of 1.1750, any attempts at reinforcement will be used for the sale, the chance to update the October low at 1.1575 are quite high.

United Kingdom

The Bank of England at the meeting of Thursday, will probably hike the interest rate by a quarter point, in response to a reduction in the unemployment rate and an increase in inflation.

At the same time, the opinions on the advisability of the Bank of England is ready to begin the cycle of awareness, or limited to a single intervention, are divided, and it is from this assessment that the fate of the book following the meeting will depend heavily on. The majority of the market expects a vote at the end, with a score of 7/2 which is in favor of the increase, and the central bank will be extremely careful in its evaluations, without providing indications on the timing of the second hike will take place.

According to the consensus of opinion of the market, the economy of the united KINGDOM is not prepared for a new cycle. Wage growth significantly lags behind the rate of growth of inflation, and therefore, there is no long-lasting confidence of the consumer demand. In addition, inflation is, in fact, is largely due to the consequences of «brexit» (a drop in the purchasing power of the pound and the rise in the price of imports) relative to internal causes. Published on Tuesday, the consumer confidence index from the Gfk Group indicates clearly that the confidence of consumers in the last 5 months is at a low level and there is no reason to expect changes in the short term.

Also, on Thursday, at the output of the update of the macroeconomic forecasts and the press conference of Mark Carney is expected. The logic of the situation assessment suggests that the inflation forecast can be raised in the short term in order to justify the rate increase, but it will remain unchanged for a long period of time, which will eventually cause a sell-off of sterling.

The most likely scenario is therefore that the market will use the rate increase to lock in profits, after which the book will give up its winning positions, and the initiative will be returned to a dollar, the growth potential is limited by a resistance of 1.3440/50.

Oil

The report of the Ministry of Energy of the united States has been slightly worse than the report published by the API from the day before, and so led to profit taking. At the same time, there are still very few reasons for a reversal and a significant drop in prices. OPEC continues to maintain a low level of production, not to allow the market to feel saturated, the prospects for the spread of the OPEC + agreement always appears at the top of, the overall demand from Asian countries continues to grow.



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