The market sentiment is mixed, but there are still interesting movements on the market.
Daily news: Fed's rate hike and Italian budget deficit
- The Federal Reserve (Fed) of the US increased the interest rates to 2.25%. It was an anticipated decision by analysts, although a reaction from the market had a mixed effect. The reason for this lies in the removal of the word “accommodative” from Federal Open Market Committee (FOMC) statement. The overall economic projections look hawkish. GDP is expected to reach 3.1% in 2018 (vs previously forecasted 2.8%), 2.5% in 2019 (vs 2.4%) and 2.0% in 2020 (vs 2.0%). The current dot plot of rate hike expectations by the Fed shows another possible rate hike in December, three more in 2019 and at least one in 2020.
- In other news for the USD, China is planning to cut import tariffs on several products on November 1. This decision may possibly extend on the imports from the US.
- Today is also full of events which can affect the USD at some point. The change in the value of core durable goods orders for August will be released around 15:30 MT time. It is forecasted that the index will increase by 0.4%. The change in the value of durable goods orders is forecasted to increase by 1.9% (vs previous -1.7%). Annualized GDP growth per quarter, in its turn, is expected to stay at the same level as in previous period at 4.2%. The end of the day is important as there is the Fed chairman Jerome Powell speech at 23:30 MT time.
Right now the dollar behaves bullish, the USD index is trading near 94.00.
- The budget problem in Italy broadened its impact on the markets and especially on the EUR. The estimated Italian budget deficit for 2019 is around 2%, although the ruling parties expect it to reach 2.4%. Today’s meeting at 21:00 MT time will show the official data. The budget pre-meeting is announced to be at 12:30 MT time. There also have been rumors about the possible resign of the Italian finance minister Giovanni Tria. An anticipation of the outcome of this meeting, as well as the Fed interest rates hike, dropped EUR/USD to its last week lows. Right now the currency is moving downwards the 100-day MA at 1.1655. The support is at 1.1644.
However, European Central bank (ECB) president Mario Draghi today’s speech (16:30 MT time) can affect the pair in a positive way, if his comments are hawkish. In this case, the resistance to keep an eye on is at 1.1830.
- Reserve bank of New Zealand (RBNZ) did not apply any changes concerning its official rate. It remains at 1.75% and stays at the same level in 2019 and 2020 according to the RBNZ governor speech. As a reaction to Fed and RBNZ decisions, NZD/USD has slipped today. Right now it is trading slightly above the 50-day MA at 0.6668. The support is at 0.6580. If some of the US indexes come out lower, than expected, it can change the situation to bullish. In that case, the resistance is at 0.6740.
- USD/CAD is rising after Canadian prime-minister Justin Trudeau comments about NAFTA deal. He told that any chance of additional tariffs from the US to Canada make a new NAFTA trilateral deal impossible. The pair has crossed the 50-day MA and the 100-day MA aiming towards the resistance at 1.31. Any positive comment from Trudeau today can bring bears to the market and make the USD/CAD move down to the support at 1.29.
- The British prime-minister Theresa May plans for no-deal Brexit were not supported by her cabinet. This resulted in the decrease of GBP/USD. The support is at 1.2988. If the situation changes, the resistance is at 1.3230.
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The market is resilient ahead of the speeches of Fed’s Powell and ECB President Lagarde, but there are still interesting movements.
The uncertainty over US fiscal stimulus and Brexit, and also rising new virus cases deteriorated the market mood. That’s why we can expect the further rally of the US dollar and the fall of riskier assets today.