02.08.201809:36 Forex Analysis & Reviews: The review of the currency market from 08/02/2018

There are many rumors that this year, the Fed will no longer raise the refinancing rate, but all of them were not justified. Of course, according to the results of yesterday's meeting of the Federal Commission for Operations on the open market, no one expected an increase in the refinancing rate, but it was believed that the accompanying note would point to a revision of the FRS's plans. However, the contents of the accompanying note completely disproved such assumptions, and the Fed intends to adhere to the previously planned plan, so in December we expect the refinancing rate to increase to 2.25%.

Naturally, this was the reason for the growth of the dollar, although you will not look at all the rest of the American statistics without tears. Thus, the index of business activity in the manufacturing sector fell from 55.4 to 55.3. Construction costs decreased by 1.1%. And the total sales of vehicles decreased from 17.5 million to 16.8 million. Only ADP showed an increase in employment of 219 thousand, which is 38 thousand more than in the previous month.

The joy of investors about the fact that the increase in the refinancing rate of the Fed is not canceled was so strong that even the growth of the index of business activity in the manufacturing sector did not help the single European currency, which increased from 54.9 to 55.1.

Pound managed to hold back, although the index of business activity in the manufacturing sector fell from 54.3 to 54.0. The thing is in today's meeting of the Bank of England on monetary policy. Moreover, everything is very similar to how events developed before the meeting of the Federal Commission for Open Market Operations. The forecasts were rather strange and contradicted what the FRS representatives said and did. Also in the situation with the Bank of England. The fact is that everyone expects an increase in the refinancing rate from 0.5% to 0.75%. But this contradicts earlier statements. Representatives of the Bank of England did not just say that it is not yet expedient to raise the refinancing rate but also hinted at the possibility of resuming the program of quantitative easing. So, like yesterday, it is unlikely that the expectations will be met. Most likely, the Bank of England will leave the refinancing rate unchanged, and the pound will have to fall to 1.3050. If the Bank of England really surprises us and raises the refinancing rate, then the pound has all chances to grow to 1.3200.

But a single European currency has all the reasons for growth. In particular, the growth rates of producer prices can accelerate from 3.0% to 3.5%, which indicates a further increase in inflation. Also in the United States, the total number of applications for unemployment benefits should increase by 8,000. And the growth is expected as primary, and repeated applications. So the single European currency can grow to 1.1675. If the Bank of England also increases the refinancing rate, then the euro could rise to 1.1700.