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Another Friday's portion of criticism of the Federal Reserve System by the US President and the general opinion of several Fed officials that interest rates should be lowered did not weaken the dollar, but rather strengthened its position against a number of risky assets.
The demand for the US dollar remains due to the fact that the markets have already laid down a July decrease in interest rates by 25 bp, and the only thing that can lead to a sharp weakening of the dollar is a decrease in the rate by half a percentage point at once.
In the afternoon, US President trump resumed attacks on the Federal Reserve System through his Twitter, in which he wrote that Americans pay higher interest rates than countries that are far from the US economically, and the Fed is responsible for the flawed thinking process. Trump was annoyed by the fact that US interest rates are much higher than in other countries, whereas they should be lower.
Surprisingly, the President of the United States Donald Trump took the opportunity to personally criticize the work of the current head of the Fed Jerome Powell.
After a number of statements made by Trump, speeches were made by representatives of the Fed. Coincidence or not, everyone spoke with one voice about the need to make changes to the current interest rates already at the July meeting, which will be held next week. The President of the Federal Reserve-St. Louis Bullard was not at all ashamed of himself and said that he would gladly have agreed to the position of Fed Chairman if it was offered to him, making a hint that shares common views with the US President on monetary policy.
Representatives of the Fed signaled the likelihood of a quarter-point rate cut, even though the economy is in good shape, as the uncertainty of global growth and weak inflation justify a rate cut. A number of Fed leaders also noted that the current trade conflicts also play an important role in this.
As for the fundamental data that came out on Friday, we can only note the report on the confidence in the economy of American households.
According to the University of Michigan, confidence in the economy increased slightly in early July of this year. The preliminary consumer sentiment index showed an increase to 98.4 points against 98.2 points at the end of June. Economists had expected the index to be 99.0 points.
The university noted that the growth of the index was due to the fact that, despite some problems in the economy, consumers are still set favorably in relation to their personal finances.
As for the technical picture of the EURUSD pair, the situation is on the side of sellers of risky assets. Given the approaching day of the ECB meeting, the breakthrough of the lower support level of 1.1200, which kept the trading instrument from falling all last week, will open a direct road to the new local lows of 1.1160 and 1.1110. However, a larger downward potential will depend on the statements made by the European regulator. Expectations for easing the ECB's monetary policy are directly tied to low core inflation.
Therefore, it is unlikely that the euro will grow significantly without the support of good fundamental data on the eurozone economy. The upward potential of the pair will be limited by the resistance around 1.1250 and 1.1280.
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