13.06.201914:30 Forex Analysis & Reviews: Hopes of the market for a speedy reduction of the Fed rate may not be justified, except on the dollar

US President Donald Trump can boast that trade tariffs bring additional funds to the country, but they do not seem to save the US budget from increasing the deficit. For 8 months of the fiscal year (started on October 1, 2018), the negative balance expanded by 38.8% or $206 billion in annual terms. At the same time, revenues from import duties rose by almost 2 times to $44.9 billion. The White House hoped that the GDP growth would remain at 3%, thanks to tax cuts, but the US economy is slowing. From how quickly it will lose speed, apparently, it will depend on the next steps of the Fed and the fate of the greenback.

In January, the American Central Bank announced that it could adjust its monetary policy and pause the rate increase process. In March, the regulator announced plans to curtail the balance reduction program in force since 2017 and when the markets collapsed by $5 trillion in May, it signaled its readiness to support the country's economy with stimulating measures.

At the moment, the derivatives market is 97.5% sure of one act of monetary expansion by the Fed this year and 82% in two.

Meanwhile, a consensus forecast of more than 100 economists recently surveyed by Reuters suggests that the Federal Reserve will not ease monetary policy easing before the third quarter of 2020.

According to experts, since the US GDP from an abnormally high value of + 2.9% is returning to its normal growth rate of 2%, then there is not much point in reducing the federal funds rate.

The USD index dropped to its lowest levels in two months against the background of an increase in the likelihood of a Fed rate cut and increased fears for the fate of the American economy.

If the chances of maintaining the current parameters of the monetary rate of the Fed begin to grow, it is assumed that the greenback will come to its senses rather quickly.

According to Deutsche Bank experts, the derivatives market can be seriously mistaken about the future trajectory of the federal funds rate, which deprives the EUR/USD "bulls" an important advantage. It is no secret that the difference in interest rates and relative to the profitability of assets in dollars and euros are some of the key factors for the foreign exchange market.

The inability of the euro bulls to storm the resistance level of $ 1.1345 has once again proved that the weakness of the dollar alone may not be enough to restore the long-term upward trend of EUR / USD. It is expected that before the Fed meeting, which will take place next week and at which the regulator may shed light on its future actions, the EUR / USD pair will consolidate in the range of 1.1255-1.1345.

The inability of the euro bulls to storm the resistance level of $1.1345 has once again proved that the weakness of the dollar alone may not be enough to restore the long-term upward trend of the EUR/USD pair. The EUR / USD pair is expected to consolidate in the range of 1.1255-1.1345 before the Fed meeting, which will take place next week and at which the regulator may shed light on its future actions.