The fall of the US dollar on Friday was unexpected. In the markets, this is explained by the fact that J. Yellen, speaking at the symposium in Jackson Hole, said nothing about plans to raise interest rates as well as the prospects for reducing the balance. It is believed that this was the reason for the depreciation of the US currency.
However, in our opinion, not everything is so simple and unambiguous. Yes, of course, if Yellen had been more "talkative" and said that the Fed will continue to stick to plans and then raise rates, if the state of the economy and the labor market had allowed it, and if she had confirmed the course to reduce the balance, it could provide local support for the dollar, but that's it and nothing more. She did not do any of these things. The Fed leaders don't always use this forum in Jackson Hole as a platform for voicing any ideas, so the explanation that everything happened because of Yellen does not stand up to criticism.
In our opinion, the reason for this market behavior is the sudden realization that Yellen is not likely to be appointed for a second term. This is because her independent personality does not suit the 45th US president. If this happens, then there is a risk that the new head of the Federal Reserve may be a conductor of D. Trump's economic ideas. It will not only make the delay in interest rate hike possible, but also postpone the decision to start reducing the balance indefinitely. It is probable that this was the scenario that caused the US dollar to sell.
Another negative factor is, as a consequence of these events, the growth of uncertainty on the wave of the battle "for life and death" between Trump and his outspoken political enemies. The longer this state of affairs lasts, the weaker the US dollar rate, as investors will try to leave dollar assets and go into protective mode.
No important economic data is expected to be published on Monday. Against this background, either the dollar's dollar rate will continue to decline with inertia or it will stop. Market participants will again take a wait-and-see attitude in anticipation of new data of economic statistics and political news.
Forecast of the day:
The EURUSD pair is trading above 1.1900 amid the chronic weakness of the US dollar. Market participants still remain hopeful that the ECB will decide to stop stimulating measures. Against this background, the price may continue to rise to 1.2030 after the correction to 1.1880.
The GBPUSD pair found resistance at 1.2915. It can continue climbing to 1.2960 if the euro strengthens the upward trend, and the dollar again falls under the sell-off due to weak data of economic statistics. If the pair does not pass the 1.2915 mark, then it can turn down to 1.2775.