16.12.201912:57 Forex Analysis & Reviews: The Federal Reserve has prepared a "new year's gift" for the markets, the dollar may fall

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Last week, US President Donald Trump and the new ECB President Christine Lagarde sided with the dollar.

On Thursday, the head of the White House wrote in his Twitter that the US is close to concluding a major deal with China, and on Friday said: the country will immediately begin negotiations with China on the "second phase" of the trade agreement. He also confirmed that Washington will not impose new duties on Chinese imports in the amount of $160 billion on December 15.

The second driver for the dollar was Lagarde, who noted that although the European Central Bank made some adjustments to the forecasts for the eurozone GDP and inflation in the region for the next year, the current parameters of monetary policy were upheld.

Thanks to these two leaders, the results of the week for the single European currency could be quite deplorable, if not for the results of the early parliamentary elections in the United Kingdom. The resounding victory of the Conservatives pushed the pound up, followed by the euro. Against this background, EUR / USD rose to 1.1200, but the balance of power was almost restored, and the main currency pair ended the week at 1.1116.

The upcoming week will also be full of events and publication of important macrostatistics. These are: the publication of data on European and American business activity (on Monday), the speech of the ECB head Christine Lagarde (on Wednesday), and the release of data on US GDP (on Friday). In addition, it will be the last full trading week on the eve of Christmas and New year.

However, it is hardly worth waiting for a repeat of currency fluctuations, such as those caused by last week's parliamentary elections in the UK. While some experts believe that the EUR/USD pair will be pressured by the success of the US-Chinese trade negotiations, others believe that the pair will continue to move upwards for some time. Although, in their opinion, this growth will be insignificant as the pair may again break through the resistance of 1.1200 and possibly rise to the zone of 1.1225-1.1235. This, however, will be followed by a trend reversal and a return to the area of 1,1000-1,1100. This scenario may take in one to three weeks to complete.

Meanwhile, the Fed intends to sharply increase the volume of REPO operations in the next month, pouring a record $500 billion into the system .

Between December 16 to January 14, the New York Fed will hold nine urgent REPO operations: the first for $50 billion, whereas the remaining eight for $35 billion.

In addition, the Federal reserve will continue to conduct daily REPO operations "overnight", significantly increasing their volume. For example, on December 30, the volume of such an operation will be $75 billion, and at least $150 billion on December 31 and January 2.

Taking into account the program of buying short-term bills, the total amount of liquidity that the Fed is going to pump into the US financial system will fall a little short of $500 billion. if this happens, then by the middle of next month, the balance of the Federal Reserve will exceed $4.5 trillion and reach new record values.

According to experts, an increase of 10% in just a month can put serious pressure on the dollar.