The published economic statistics in the United States again show mixed dynamics, which, as we indicated earlier, is the main constraining factor for the Fed in deciding to actively cut interest rates. Of course, this is in addition to the increased risk of higher inflation in the wake of a trade war with China.
Some discrepancy is indeed noted in the output of economic statistics. For example, a week earlier, the University of Michigan's consumer sentiment index came out, which showed a significant drop in consumer sentiment this month and was another excuse for investors to expect the regulator to continue lowering interest rates. Although the Conference Board consumer confidence index values presented as early as Tuesday showed a decrease, but not as noticeable as expected. The indicator fell to 135.1 points in August against the value for the previous reporting period at 135.8 points and the forecast for a fall to 129.5 points. A similar picture is observed in many mutually related indicators.
In our opinion, one of the most important reasons for the Fed's passivity in terms of rates is the regulator's fear that a trade war will lead to a rise in inflation in the country amid rising import duties. In this case, she will be in an extremely difficult situation. On the one hand, a slowdown in economic growth will dictate the need to stimulate it, for example, by lowering rates. But on the other hand, the Central Bank will face inflation growth, which on the contrary, needs to be extinguished by increasing the cost of borrowing based on modern economic views.
We have already pointed out the prospect of the possibility of such a paradox, and the reasons for which still exist.
This week, the focus will be on the publication of the next release of US GDP data for the 2nd quarter. The indicator is expected to slow growth to 2.0% from 2.1% and important, especially in the current difficult situation. If they are weaker than expected, they can encourage the Federal Reserve to become more active in developing solutions to effective incentive measures. Given this, we believe that the foreign exchange market will stagnate before these values are released.
Forecast of the day:
The AUD/USD pair remains in a short-term downtrend amid the uncertainty of the future monetary policy of the RBA and a trade war between the United States and China. Fixing the price below the level of 0.6740 may become the basis for lowering prices to 0.6710 or even lower to 0.6680.
The same reason to put pressure on the NZD/USD pair that is decreasing and is already below the local minimum of 0.6350 in January 2017. Fixation below this mark will lead to a further fall in prices to 0.6245.
