14.08.201910:37 Forex Analysis & Reviews: Investors believe that the Fed will continue to lower rates anyway (We expect local growth of the USD/CAD pair and a decrease in AUD/USD pair)

The American president again showed himself in all its glory, softening the backdrop of the US trade war with China.

Unexpected news from the US Department of Commerce that new import duties on Chinese imports will not be introduced, primarily electronics products, mobile phones until December 15 of this year. Also, negotiations with the Chinese side have resumed that inspired financial markets, which caused rapid growth in stock markets in the United States, positive dynamics in Europe and even today the rise of Asian stock indices. The propensity to buy risky assets was not even stopped by data on the growth of consumer inflation in America.

According to the data presented, the consumer price index in annual terms rose above expectations by 1.8% compared with the previous value of 1.6% and a forecast of an increase of 1.7%. On a monthly basis, the indicator grew in July in line with expectations by 0.3% against the June value of 0.1%. Also, the numbers and the basic consumer price index did not lag behind, which reflect changes in prices for goods and services, except for food and energy. This indicator shows the changes from the point of view of the consumer. In July, the value of this indicator increased by 0.3% against the forecast of a decrease in growth to 0.2%, which turned out to be in line with expectations. But its annual value showed an increase of 2.2% from 2.1% for the previous reporting period.

The published values of consumer inflation were completely ignored by markets on Tuesday since all investors focused on the news on US-Chinese trade relations. However, bidders are unlikely to be able to completely abandon these important values, which in fact can bury investors' hopes that the Fed will continue to lower interest rates. But this is when we look at the overall situation without the impact of the trade conflict between Washington and Beijing. While markets are wholly at the mercy of this factor, they believe that the regulator will be forced to accept further rate cuts and the positive may remain. Incidentally, futures rates on the Fed show this probability of 95.0%.

In general, observing everything that is happening in the markets, it can be said that the uncertainty factor for the prospects of resolving the trade crisis will continue. In this case, according to investors, the Federal Reserve will still be forced to lower interest rates at the September meeting, which will halt the growth of the dollar and may even become the basis for its local decline.

Forecast of the day:

The USD/CAD pair found support at 1.3200. We do not expect continued growth in oil prices. In addition, inflation data in the United States support the dollar. Given this, we believe that the pair will turn up and continue to grow first to 1.3290, and then to 1.3335 if it holds above 1.3200.

The AUD/USD pair is turning down amid local strengthening of the US dollar due to strong data on consumer inflation in the United States. Price reduction below the level of 0.6755 may lead to the resumption of the fall in prices to 0.6680.