20.02.201913:13 Forex Analysis & Reviews: Review of the foreign exchange market on 02/20/2019

Yesterday, the dollar quite actively lost its position, although if we rely on macroeconomic statistics, there are simply no reasons for this. Thus, the unemployment rate and the growth rate of the average wage in the UK remained unchanged. Yet, a decrease is expected in the unemployment rate, as well as the acceleration of the growth of average wages. Also, data on the construction industry in Europe showed a slowdown in its growth from 1.1% to 0.7%, while an acceleration of 2.1% was predicted. Thus, given that no data has been published in the United States, the weakening of the dollar looks rather strange.

Nevertheless, yesterday rumors began to spread that at the minimum before the signing of a new trade agreement between the United States and China, the Federal Reserve System would try to avoid direct statements regarding the possibility of easing monetary policy. Considering that the text of the minutes of the Federal Commission on Open Market Operations is being published today, bidders began to play against the dollar. If indeed there would be no indication of reducing the rate of decline in the balance of the Federal Reserve System, they will actively buy the cheapened dollar. Such rumors themselves are completely substantiated since the US Central Bank must consider the position of the Bank of China, which under the conditions of commercial uncertainty and tendency of the Federal Reserve in mitigating the monetary policy towards softening. Indeed, there is a high probability that any hints of the possibility of mitigating the monetary policy of the Federal Reserve System, which will lead to a stronger dollar, will be excluded from the text of the protocol.

Another interesting point is the meeting between Theresa May and Jean-Claude Juncker. It also became a reason for the weakening of the dollar because any hint of progress in terms of reaching agreements on the part of the divorce agreement has a positive effect on the expectations of market participants. However, relying on the results of previous meetings, as well as on the fact that the parties have not advanced a single step on this issue over the past two years, it is worth expecting that this meeting will bring some disappointments. On another end, dismay on the British side since this situation itself only promises some advantages for Europe. It turns out that the fully programmed result of this meeting will also be an occasion to weaken the pound and followed by the single European currency.

EUR: Most likely, the single European currency will drop to 1.1300.

GBP: The pound will be reduced to 1.2950.