31.01.201809:24 Forex Analysis & Reviews: The dollar is waiting for the decision of the Fed

Yesterday, the dollar failed to take advantage of the frankly weak European statistics. In particular, the UK data on the lending market showed a dramatic reduction in the number of approved applications for mortgages, from 64,712 to 61,039. Although consumer lending remained at the same level, at 1.5 billion pounds a month. In turn, the second estimate of the GDP of the euro area for the fourth quarter, was the same as the first, that is, 2.6%, although we are waiting for 2.7%. So, against this background, the dollar should have gone up, but we did not see it. Apparently, it's all about the market's expectations regarding the outcome of today's meeting of the Federal Commission for Open Market Operations.

Of course, the main event of the day will be just the meeting of the Federal Commission for the open market operations, but before its results, preliminary data on inflation in the euro area will be published. It is expected that the inflation will slow from 1.4% to 1.3%, as warned by Mario Draghi. So, there are plenty of reasons to worry about a single European currency. The Fed is waiting for exactly one confirmation of plans for a threefold increase in the refinancing rate this year. If the Fed repeatedly declares such a possibility, the dollar will begin to be adjusted. Nevertheless, there are fears that with the new head, the Fed can reduce the pace of tightening monetary policy. It can be assumed that, in part, this possibility is already embedded in the dollar price.

If the Fed confirms its last year's plans, then the euro / dollar pair will drop to 1.2275. Otherwise, the pair will grow to 1.2500.

The Fed's intention to increase the refinancing rate three times, will reduce the pair of pound / dollar to 1.4000. If the Fed starts reviewing these plans, the pair will grow to 1.4275.