13.12.201704:42 Forex Analysis & Reviews: US dollar strengthens position ahead of decision of the Fed

Good data on producer prices and expectations that the Fed will soon hike interest rates, continues to support the US dollar, which has grown significantly against risky assets.

In the first half of the day, the euro quickly came under pressure after it was announced that in December of this year the economic sentiment in Germany deteriorated. This happened because of problems with the formation of the government.

According to the report of the research center ZEW, the index of economic expectations in Germany in December fell to 17.4 points from 18.7 points in November. Economists predicted that the index will be 18.1 points. Let me remind you that after the elections in Germany, the interim administration has been in power for more than two months, as Angela Merkel's party failed to acquire the majority.

The US data was supported by the US dollar. Thus, the optimism of small business owners grew in November. According to the report of the National Federation of Independent Business, the index of optimism in small business increased in November by 3.7 points compared to October, to 107.5 points. Growth was achieved due to expectations that in the future the business environment will improve.

Inflation in the US continues to grow. According to a recent report, the indicator of producer prices in the US rose in November of this year. Therefore, according to the US Department of Labor, producer prices increased by 0.4% compared to the previous month, fully coinciding with the forecasts of economists.

The base index, excluding volatile categories, also grew by 0.4% compared to the previous month. In comparison with the same period of the previous year, producer prices increased by 3.1%.

Such good data forces market participants to certainly expect interest rate hikes from the Federal Reserve System.

As for the technical picture of the EURUSD pair, the level of support at 1.1750 was passed, and now the whole focus of the sellers will be on the new weekly lows of 1.1715 and 1.1680. In the event of an unsuccessful consolidation and a return to the end of the day at 1.1750, we can consider possible further growth of the euro in the short term.

On Tuesday, the British pound tried to strengthen on inflation data, which nearly completely coincided with economists' expectations, as a result of which protracted growth did not occur. Despite this, buyers still managed to hold the pound above 1.3330, which provides hope for sustained growth in the pound.

According to the report, the annual rate of inflation in November was 3.1%, while economists expected that prices would rise by 3.0%. Compared to October, in November, inflation rose by 0.3%, contrary to expectations of economists, who expected 0.2%.