Investors expected that the head of the Fed, J. Yellen will give details of his attitude to the lack of growth in consumer inflation at the conference in Cleveland,. They also expected her to say what the Fed can do in this case.
Indeed, for the first time in recent months, Yellen detailed the likely actions of the Fed if consumer inflation stops at 1.5% -1.7% and this process stabilizes. She said that in this case, the interest rate cycle will stop. However, she made it clear that this is unlikely to happen. She also added conversely that even in the short term against the backdrop of a series of hurricanes that hit the States in September which caused material damage, inflation can grow. Yellen also said that it is necessary to continue the cycle of raising interest rates, since if you do not, then in the end a strong labor market will contribute to the explosive nature of inflation. This can not be tolerated because this can have a negative impact on the economy.
In general, her performance outweighed the negative for the dollar with a positive. This led to its strengthening in the world foreign exchange market. Against this background, the dollar index confidently surpassed the mark of 93.00 points.
Under significant pressure in the market, the euro grew unreasonably in the last months on expectations that the ECB can make the decision to terminate measures of stimulation of the European economy. It was also supported by the weakness of the US dollar against the backdrop of stabilization of inflation and correction of some economic data. These were perceived by the market as important conditions that hinder further increase of interest rates.
From the data published today, in our opinion, the figures for basic orders for durable goods and the index of unfinished sales in the US real estate market will be interesting. If they come out better than forecasts, this will additionally support the local growth of the dollar.
Forecast of the day:
The EURUSD pair is testing the support line at 1.1755, which, from a technical point of view, opens the way for it to further decline to 1.1690 amid the strengthening of the US dollar's position and the view that the ECB will not radically change its monetary policy.
The GBPUSD pair broke through the support level at 1.3400, which could lead to a decrease to 1.3300.
