The Federal Reserve has already raised interest rates twice this year.
Forex today: conflicts to their full extent
- FOMC meeting minutes supported the US dollar. Although CPI figure declined, Core CPI growth remained unchanged, the greenback is slightly rising.
Key points of the Fed’s minutes: economic outlook has strengthened in recent months; annual inflation is anticipated to rise in coming months; significant boost of fiscal policy growth is expected over next few years. At the same time, trade wars tensions also were taken into consideration. According to the Fed, retaliation from other countries is a downside risk for the US economy. Moreover, a positive inflation data alone will not signal the change of the projected rate hike path.
However, traders assessed the minute as hawkish and the greenback rose.
- The situation around airstrikes in Syria is getting worse. Firstly, Mr. Trump said that the US are preparing a missile strike on Syria, later he gave chances to a peaceful settlement of the conflict. But the UK’s comments about the possibility of the attack as early as Thursday night made the world shudder. Who is next?
- Wednesday was a positive day for oil. Brent and WTI were rising based on the negative news on the Syrian conflict. It is not a surprise that oil rises amid conflicts in the Near East. WTI reached the level of $67.42, Brent $73.09. But both benchmarks are falling today. Yesterday’s oil inventories data appeared to be greater than expected (3.3M vs -0.6M).
WTI is trading near $66.70, Brent is below $72.
Note: the general forecast for oil has risen. Barclays increased their 2018, 2019 average Brent price forecasts: $63 in 2018, $60 in 2019 vs the previous forecast of $60 in 2018, $57 in 2019. Q2 Brent forecast increased to $68 from $62.
- It seemed that trade wars tensions eased on Tuesday after the speech of China’s President. But it appeared to be a mistake. Let us remember that Xi Jinping declared dialog as a solution of trade wars disputes. However, today China’s commerce ministry said about the misleading of China’s president’s speech. The truth is that China is well-prepared for the escalation of tariffs and it will fight back without hesitation.
Trade wars are closer and closer.
Some words about currency pairs.
- Today the Canadian dollar is depreciating against the US dollar. The USD/CAD is moving to the resistance at 1.2606, if the pair is able to break it, the next resistance is at 1.2630. However, the loonie has chances to change a direction of the pair. NAFTA officials are anticipated to negotiate for a preliminary deal this week. U.S. Trade Representative Robert Lighthizer, Canadian Foreign Minister Chrystia Freeland, and Mexican Economy Minister Ildefonso Guajardo will meet during the summit in Lima. If there is a progress in negotiations, the CAD will rise.
- The euro traders are anticipating ECB monetary policy meeting accounts today at 14:30 MT time. The central bank will explain its recent interest rate decision. The ECB declared its willingness to taper the monetary policy soon. Hawkish minutes will push the EUR upward.
The EUR/USD pair could not break the pivot point at 1.2369 that would signal the upward movement. The pair turned around and now is moving down. The support is at 1.2342.
- Tensions strengthened, but the USD/JPY pair is rising. There were two reasons for the growth: the appreciation of the US dollar and comments on the future quantitative easing of BOJ Governor Mr. Kuroda. But the rise is not big, the pair is below 106.85. To move upward, bulls need to break above the level of 107. The next resistance will lie at 107.35. However, the further conflicts’ escalation may lead to the yen’s appreciation.
That is all for today. Follow markets news with us!
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