American focus: the dollar continued to depreciate against major currencies

The Euro has grown significantly against the U.S. dollar, reaching a peak on 26 September, responding to the easing of political tensions around Catalonia.

Yesterday the head of the government of Catalonia Pujdeme called for dialogue and not declared independence from Spain. He also proposed to examine the issue of international mediation. However, Putteman noted that it adopted its mandate for the establishment of an independent Catalonia. Meanwhile, today the Spanish government met in Madrid to give its answer to the Catalan independence movement. The Prime Minister of Spain, Mariano Rajoy said that the government agreed to formally ask the regional government of Catalonia, declared the independence whether they are or not. While Rajoy has allocated Podemno 5 days for clarification and another 3 days to “fix” this situation. Rajoy said that Catalonia as soon as possible to restore law and order, legal security, and added that the dialogue certainly possible, and perhaps even to raise the question of amending the Constitution.

The increase in EUR/USD also contributed to the decline of yields on 10-year US bond, and widespread weakening of the American currency ahead of the release of the minutes of the September FOMC meeting. However, some investors do not expect that the Protocol will contain any important information, because after the meeting, fed Chairman Yellen answered questions and the heads of the Federal reserve has released its latest economic forecasts.

Some pressure on the dollar had a dovish statement by the fed representative, Evans. He said that it was too early to talk about raising rates in December, but sees room for “honest discussion” of the need to raise rates later this year.

Gradually, the market participants ‘ attention shifts to inflation data for the US, which will be released on Friday, and can help to mitigate the concern among FOMC members that the slowdown in inflation that began in the spring, will continue. Meanwhile, September’s strong report will further weaken inflation concerns and make rate hike in December is more likely. According to the average forecasts in September, consumer prices rose 0.6% after increasing 0.4% a month earlier. In annual terms, the pace of price growth is expected to have accelerated to 2.3% from 1.9% in August.

The pound consolidated against the US dollar, staying near yesterday’s high, which was associated with a lack of new drivers that can cause large-scale movements.

The US dollar index showing the ratio of the dollar against a basket of six major currencies, was down 0.20%, to 93.10, not far from the low of September 29.

However, market participants have any doubts about whether expectations for higher interest rates in Britain reasonable amid uncertain negotiations on Brexit. In spite of Brexit and the downward revision of forecasts for economic growth in the UK, futures markets mortgage rates interest rate increase by the Bank of England by 50 basis points over the next year, “the Pound managed to remain fairly stable, despite the fact that last week’s continuing political disputes,” said Michael Hewson, chief market analyst for CMC Markets in London, who expects further growth will be limited unless the pound will not break through some key technical levels.

Some impact on the pound had statements by the Minister of Finance of great Britain Hammond. In a speech in Parliament he said that the negotiations on the withdrawal from the European Union harm the British economy, and form above the “cloud of uncertainty”. Hammond said that Britain is “fundamentally stable”, and now there are “some very positive things, along with strong prospects for the future.” But he added that “a cloud of uncertainty over ongoing negotiations acts as a temporary buffer”. According to media reports, the British government is preparing for the scenario of “no transactions”, but Hammond told lawmakers that now is not the time to consider such contingency plans. “I don’t think we need to do potentially unnecessary costs, while we do not need,” he said. However, Hammond added that 250 million pounds has already been transferred to several departments to prepare for the scenario “hard Brekzita”, which would mean a lack of access to the single market of the European Union.

Information-analytical Department Forex club

American focus: the dollar continued to depreciate against major currencies 12.10.2017

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